5 things to watch this week: Bitcoin closes at record high

Bitcoin (BTC) simply refused to die this week as bears got burned once again as the drop below $60,000 barely lasted an hour. After a fairly quiet weekend, Sunday’s decline was followed by a dramatic bounce in BTC/USD just an hour later. In doing so, not only did Bitcoin maintain its bullish trajectory, but it also recorded its highest weekly close ever - around $61,500.

Volatility is inevitable as the market prepares for the possible start of trading in the first U.S. bitcoin exchange-traded fund (ETF), analysts say.

Cointelegraph breaks down five things to watch this week, including BTC/USD climbing to all-time highs and a historic leap in institutional access.

Bitcoin Gives Less Than an Hour to 'Buy the Dip'

Just when the road to all-time highs seemed to be hitting a stumbling block, Bitcoin surprised everyone again overnight.

After losing $60,000 late on Sunday, the bulls had no time for BTC price weakness and started an aggressive buying spree before BTC/USD hit $59,000. A few hours later, Bitcoin was back above $60,000 and above $62,000.

The incident didn't even affect bitcoin's weekly close, which despite volatility was at its all-time high - around $61,500. Trader and analyst Rekt Capital concluded on Monday: "The historic weekly close means BTC is well-positioned for further gains."

He added that the next phase of BTC’s price action will be “more volatile” than the previous ones, in line with the previous bull market years of 2013 and 2017.

While various analysts celebrate the milestone of a weekly close, the upcoming U.S. market open could also provide excitement.

Monday could see the debut of a Bitcoin ETF product with the blessing of U.S. regulators, as BTC/USD falls within $3,000 to a new all-time high.

In derivatives, funding rates across exchanges have also fallen since last week, providing some relief to those who feared the market’s upside was unsustainable and would eventually peak.

ETFs are great, but not for everyone

Love it or hate it right now, this week is all about the Bitcoin ETF.

As rumors of a green light from U.S. regulators began to circulate over the weekend, bitcoin price action picked up momentum and this week looks set to continue that trend.

After years of rejection, the U.S. Securities and Exchange Commission (SEC) is preparing to witness the launch of two ETF products, both based on CME Group’s Bitcoin futures.

Ahead of that, next month begins a lengthy decision-making process involving physical bitcoin ETFs — those with actual BTC as their underlying asset — and a topic of genuine interest to analysts.

There's no guarantee these traditional ETFs will be approved, and there's already a lot of concern that the market might be disappointed yet again.

However, with multiple applications pending, the SEC still has six months to achieve a breakthrough.

Optimism in favor of the crypto sector continued this week as Grayscale confirmed it would apply to convert its bitcoin fund product into an ETF.

stay tuned

— Barry Silbert (@BarrySilbert) October 17, 2021

Grayscale’s Bitcoin Trust itself has become the talk of the town in recent weeks. The fund is trading at an increasing discount to spot bitcoin prices amid fears that institutional clients will flee ahead of the ETF’s launch.

The former's higher fees are an example of a competitive advantage argument, while some point out that, by definition, futures-based ETFs won't function as a suitable alternative.

This chart shows why you're better off buying bitcoin instead of a bitcoin futures ETF. For investors, the new bitcoin ETF could be more costly than buying the cryptocurrency outright. Bitcoin futures have underperformed by 30 percentage points since Bitcoin Future began in 2017.

— Holger Zschaepitz (@Schuldensuehner) October 17, 2021

Cryptocurrency trading firm QCP Capital added in a note to Telegram channel subscribers on Friday: “First, most institutional players have direct access to CME futures. Often, the main reason they choose to trade ETFs over futures is to Avoid tracking errors of futures relative to spot prices".

"Thus, an ETF based on CME futures undercuts the fundamental advantage of an ETF; tracking spot prices as closely as possible."

The difficulty will increase for the seventh time in a row

The fundamentals of the Bitcoin network continued to impress this week.

Arguably the most important feature of bitcoin is its strengthening difficulty, which posted its seventh straight gain on Tuesday. The last time this happened was in 2019.

This increase would bring the difficulty back above 20 trillion for the first time since June.

Despite some fluctuations in hashrate, estimates are now back down to 123 hashes per second (EH/s), having reached over 140 EH/s this month.

However, with Bitcoin’s overall uptrend still intact, news that the U.S. is now the main source of Bitcoin mining power has been of little concern.

Supply shocks point to 'bumper year' in 2022

While bitcoin price predictions focus on what might happen in the fourth quarter of the year, some have looked further afield and used data to draw more optimistic conclusions.

Willy Woo is an analyst who paints a rosy picture for 2022. He is the founder of Woobull, a data resource known for his research on Bitcoin market cycles.

Over the weekend, Woo highlighted Bitcoin's growing scarcity as a possible driver of the ongoing price squeeze.

Historically, a reduction in supply combined with more supply sitting in the hands of holders who have no plans to sell creates a strong bullish signal, he noted.

His metric, "Long Holder Supply Shock," clearly shows this happening multiple times in Bitcoin's history.

"The professional title for this chart is '2022 will be a good year,'" he concluded to his Twitter followers.

As Cointelegraph reported, long-term holders have controlled a near-record percentage of the BTC supply, leading to expectations that the scramble for the remaining bitcoin will be fiercer than ever.

That should be helped when physical ETFs are approved, which could happen as soon as November and continue for several months.

Meanwhile, BTC balances on major exchanges, tracked by CryptoQuant, have stabilized at just under 2.4 million BTC after a precipitous fall in September.

The Next Bitcoin Bear Market Is Coming

With so much excitement about a possible Bitcoin price peak this year and how high it could reach, some analysts have turned their attention to the opposite — a bear market.

Historically, nothing goes up in a straight line, and Bitcoin is no exception. Each halving cycle will see a price peak in the second year after the block reward halving, followed by a mid-cycle price bottom.

Several prominent market participants claim that this cycle will be no different.

Hence, the price peak will be followed by a long pullback, in line with what happened in 2014 and 2018.

For popular Twitter analyst TechDev, the bottom line should still be an order of magnitude higher than last time — as much as $60,000 — but the process should have begun before 2021 ends.

"I want an extended cycle. Who wouldn't? But on a macro level, there's nothing to suggest that's going to happen," he warned fans over the weekend.

"Watch your indicators. 2-week RSI channel, RVI 92-93. If they break, I'm out. Ignore them, hope for a new paradigm, you're likely to be thrown aside by those who don't .”

Among several drawings, one neatly shows how Bitcoin's relative strength index on a two-week time frame captures each peak neatly

Rekt Capital, who is also a Twitter celebrity, also took this opportunity to remind fans and users that they need to seize the opportunity to make profits.

“People think BTC will never see another 80% bear market because it’s mainstream right now and it’s too mature an asset,” he said.

"Let's not forget that there was a -53% correction a few months ago. The depth of the average bear market is -84.5%. After this bull market, it's likely to be the case."

Still, bullish predictions for a bear market were made over the weekend, with Pantera Capital CEO Dan Morehead claiming the trough will be "shallower" than others.