Key Takeaways:
- Bitcoin rose by 9.5% on Wednesday.
- Analysts anticipate further upward movement.
- Market-neutral bitcoin cash and carry trade offers 14% annualized return, per Glassnode.
Bitcoin {{BTC}} surged 9.5% on Wednesday, registering its biggest single-day percentage gain since Oct. 23, according to charting platform TradingView.
Bitcoin’s price surged to $64,000 across various exchanges, marking its highest level since November 2021. This significant increase follows a parabolic move from Monday’s low, which hovered near $51,500. Analysts attribute the recent rally to Wall Street’s growing acceptance of spot-based bitcoin exchange-traded funds (ETFs). The CoinDesk 20 Index, a broader measure of the cryptocurrency market, has climbed more than 10% over the course of this week.
Market sentiment suggests that the rally will persist in the months ahead, potentially propelling prices into six figures. Analysts at crypto exchange Bitfinex have forecasted a conservative price target of $100,000 to $120,000 to be achieved by the fourth quarter of 2024. They anticipate the cycle peak to occur sometime in 2025 in terms of total crypto market capitalization.
One key factor driving this optimism is the introduction of ETFs, which have brought about “passive demand.” This type of demand originates from investors who view bitcoin primarily as a store of value rather than a tradable, volatile asset. This shift in perception is significant, as it represents a departure from previous market dynamics, where bitcoin was primarily seen as a speculative instrument.
Earlier this week, Peter Brandt, a prominent figure in technical analysis, projected that bitcoin could reach a peak of $200,000 by September 2025. These optimistic forecasts are likely to buoy the spirits of directional traders, who stand to benefit from potential price movements.
However, non-directional traders need not feel sidelined, as the cash and carry arbitrage opportunity in the bitcoin market is currently offering attractive returns. This strategy yields three times more than the yield on the 10-year U.S. Treasury note, commonly referred to as the risk-free rate.
Cash and carry arbitrage is a market-neutral approach that exploits price differences between spot and futures markets. By simultaneously holding a long position in the spot market and a short position in futures contracts, arbitrageurs capitalize on the premium that futures may trade at over spot prices. As futures contracts approach their expiration date, this premium diminishes, eventually converging with spot prices at settlement, thereby generating a relatively low-risk return.
According to data from blockchain analytics firm Glassnode, the bitcoin cash and carry strategy, involving three-month futures, currently yields over 14%. This significantly surpasses the yield offered by traditional safe-haven assets like the 10-year Treasury note, which stands at 4.27%, and the 1-year Treasury yield of 5%.
The allure of higher returns in the futures market could draw more capital into the cryptocurrency space. Glassnode noted in its weekly newsletter that the attractive yield available in futures markets is likely to attract market makers back into the digital asset space, thereby deepening market liquidity.