A decrease in bear activity in the Bitcoin market could be a harbinger of the first green shoots of the BTC bull market predicted by many analysts.
The Commodites Futures Trading Commission (CFTC) released data on Friday that showed that betting against bitcoin is grinding to a halt. Could this be the start of the bull market that all the experts are waiting for?
Possibly. Bitcoin has spiked several times in recent days and it’s showing signs of a comeback. It has been a brutal year, but some experts predict that the next bull market will be absolutely unprecedented and record growth could be on the cards. At the time of writing, August 27th at 19:00 UTC, BTC had posted gains of over $400 per bitcoin, to $6,765, since a low of around $6,300 on the 20th August.
Short Bets Are Dropping Hard
Speculators have been trading non-commercial futures of bitcoin in the past months, basically betting against the market as bitcoin continued its inexorable slide from $19,000 down to the $6,000 mark. Now the coin is starting to rally and the shorts have stopped.
That activity has slowed to a relative crawl in the last two weeks. A net position of -1266 contracts in the week ending on August 21st is the lowest on record since the futures were first listed on the exchanges in December last year.
At their most extreme, just 10 weeks ago, there were more than -1900 contracts. This is a serious shift in the market and could be the sign of the big bull market that is looming large.
ETF Review Suggests The Time Is Coming
Last week’s news that the SEC would review a series of decisions on ETFs could also be a break in the clouds. The SEC denied permission for nine different ETFs and ProShares was among the casualties with a pair of bitcoin ETFs.
Now the SEC has revealed it has no issue with the Bitcoin technology or bitcoin’s value. The problems are with the ecosystem, the exchanges and other new businesses. The real concerns lie with potential market manipulation and the SEC will now review its own findings. Effectively it is a ‘stay’ on the rejection orders.
SEC Secretary Brent Fields said in an open letter to the community. ““This letter is to notify you that, pursuant to Rule 43 1 of the Commission’s Rules of Practice, 17 CFR 201.431, the Commission will review the delegated action. In accordance with Rule 43 1 (e), the August 22 order stays until the Commission orders otherwise.”
This is a significant about-face, and has been taken as an encouraging sign that the SEC wants to properly regulate bitcoin and ETFs. A follow-up Tweet from the SEC’s Hester Pierce revealed that the initial findings were produced by junior staff and senior management are now involved.
That has helped bolster consumer confidence and we can perhaps look forward to a raft of ETFs in 2019.
Yesterday’s staff orders disapproving SRO rules related to a number of bitcoin ETFs are stayed pending Commission review. See, for example: https://t.co/Ky9Z8t1E4q
— Hester Peirce (@HesterPeirce) August 23, 2018
ETFs have turned into an outsized issue, especially with the Winkelvoss brothers’ high-profile attempt to launch theirs. Their failure may have contributed to accelerated selling, which hastened bitcoin’s decline, although our own Paddy Baker suggested that BTC sell-offs as a result of ETF decisions could have been exaggerated.
Either way, the SEC’s own words may have helped to calm the waters and that could have contributed to the reduction in bitcoin shorts. Investors haven’t flinched this time around either, and there is no sign of big investors dumping after the SEC review ruling – another possible contributing factor to the declining short positions.
With an influx of commercial and retail investors, this could be all it takes to give bitcoin the push it needs to spike dramatically. As Yale University recently outlined, investors will be drawn back to the bitcoin fold as it gathers momentum – and that is the start of a bull market.
The signs are there. This time, the bear market might just be at an end…
The author is not currently invested in digital assets.