• Here’s how rising institutional interest is boosting Bitcoin’s dominance

  • With Bitcoin’s price comfortably above $50,000 for the past five days, its market monopoly appeared to have returned. The king coin has outperformed all coins in the top ten list by market cap over the last week, with weekly gains exceeding 15%.

    Following the price breakout, Bitcoin’s dominance increased to 45 percent, the highest value since August. So, what fueled Bitcoin’s rise to prominence?

    Increased institutional interest

    As $100 million in BTC left centralized exchanges over the last week, the behavior suggested that investors were looking to hold. More importantly, the number of large transactions, including those worth more than $100,000, that took place on a given day increased. Large transactions, in general, serve as a proxy for institutional activity due to their size.

    Notably, the number of Bitcoin large transactions reached a four-month high, with more than $240 billion transferred per day for three days in a row. This reflected a growing appetite among institutions to invest in the king coin.

    Indeed, on October 8, JPMorgan sent a note to clients in which the firm attributed the recent rise in Bitcoin’s price to institutional investors seeking a hedge against inflation. Notably, earlier this year in May, the company took a completely opposite stance on the top coin, noting that big investors were switching out of Bitcoin and into traditional gold at the time.

    Data on healthy derivatives

    There appears to be growing optimism about the possibility of a Bitcoin ETF being approved by the end of October. According to Eric Balchunas, Senior ETF Analyst at Bloomberg, the decision has a 75% chance of being approved in October.

    As a result of the positive news and high expectations from the king coin, the derivatives market is also seeing some good action. Notably, prior to the crash, funding rates on the three most traded exchanges reached their highest level since May.

    When funding rates are positive, the asset is priced at a premium, and long holders must pay a fee to short holders. At the time of writing, long holders willing to pay the funding fee to purchase Bitcoin perpetuals indicate that the price is likely to rise.

    However, funding rates are still significantly lower than they were in February and April.

    In terms of metrics, BTC’s aSOPR is indicating a similar bounce seen in October 2020, when the coin increased by 250 percent. So, if aSOPR’s uptrend continues, a similar breakout for BTC is possible.

    For the time being, however, with derivatives data looking good and institutions jumping on the BTC bandwagon, it appeared that the top coin’s run could play out extremely well.

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