Bitcoin Bounces Back Amid Geopolitical Tensions, Institutional Demand Remains Strong

Bitcoin (BTC) is showing signs of recovery in the European trading session on Monday, climbing above $107,000 after a slight correction last week. Despite this positive price action, market sentiment remains cautious as the Israel-Iran conflict enters its fourth day following renewed attacks over the weekend.

However, institutional interest in Bitcoin remains robust. Metaplanet added 1,100 BTC to its holdings, while spot Bitcoin exchange-traded funds (ETFs) recorded a total inflow of $1.37 billion last week.

Market Believes in a Peace Deal – The Kobeissi Letter

Bitcoin’s price faced a sharp correction on Thursday, hitting a low of $102,664 on Friday as the Israel-Iran conflict intensified. However, BTC recovered initial losses and closed the day positively around the $106,000 level. Earlier on Friday morning, Israel launched airstrikes against Iran’s nuclear program and military targets. In response, Iran launched a new barrage of missiles and drones against Israel on Sunday night. The attacks between Israel and Iran continue on Monday, escalating tensions.

The Kobeissi Letter reports that although headlines point to further escalation and a longer war, the stock market indicates the “EXACT OPPOSITE.”

The report continues, noting that the stock market has turned positive, followed by a rise in oil prices, while safer assets like gold are trading lower. Risk assets like BTC are also recovering slightly.

An analyst states, “If the market were truly concerned about a long-term conflict, oil prices would already be above $100/barrel,” concluding that the market seems to believe a peace agreement is on the horizon.

The likelihood of a peace agreement is slim, and investors should exercise caution, as any further escalation in this ongoing conflict would trigger risk-off sentiment in the market, which is not conducive to the prices of riskier assets like Bitcoin.

Institutional Demand for Bitcoin Remains Strong

Institutional demand for Bitcoin starts the week on a positive note. Japanese investment firm Metaplanet announced on Monday that it has purchased an additional 1,112 BTC, bringing its total holdings to 10,000 BTC.

Furthermore, institutional demand for Bitcoin also strengthened last week. According to data from Coinglass, spot Bitcoin ETFs in the U.S. recorded a total inflow of $1.37 billion last week, compared to an outflow of $128.81 million in the previous week.

Bitcoin Price Forecast: Price Action Suggests Bull Trap

Bitcoin’s price fell sharply, from Wednesday’s opening of $110,274 to Thursday’s close of $105,671, establishing a Fair Value Gap (FVG) around $108,064. This bearish FVG marks a key resistance zone, meaning that once Bitcoin collects liquidity in this zone, it is likely to continue its correction. Currently, BTC breaks above its daily resistance level at $106,406 and heads towards the FVG level.

If BTC faces rejection around the $108,064 level, it could extend the decline to retest its key support at $102,943, the 50-day Exponential Moving Average (EMA). A successful close below this level could extend the fall to retest its psychologically important level at $100,000.

The Relative Strength Index (RSI) on the daily chart is hovering around its neutral level of 50, indicating indecision among traders. The Moving Average Convergence/Divergence (MACD) on the daily chart showed a bearish crossover on Thursday, signaling a sell signal and indicating a downward trend.

Conversely, if BTC recovers and closes above its FVG level at $108,064, it could extend the recovery towards retesting its all-time high of $111,980 from May 22.

Bitcoin, Altcoins, and Stablecoins: FAQs

• Bitcoin: The largest cryptocurrency by market capitalization, designed to serve as digital money. It operates without control from any single entity, eliminating the need for third-party involvement in financial transactions.
• Altcoins: Any cryptocurrency other than Bitcoin. Some consider Ethereum not to be an altcoin due to its foundational role. Litecoin is often regarded as the first altcoin, forked from the Bitcoin protocol.
• Stablecoins: Cryptocurrencies designed to maintain a stable price, typically backed by a reserve asset. Their value is often pegged to a commodity or financial instrument, such as the U.S. dollar, and their supply is regulated by an algorithm or demand. They provide a stable entry and exit point for investors in the cryptocurrency market and allow for value storage.
• Bitcoin Dominance: The ratio between Bitcoin’s market capitalization and the total market capitalization of all cryptocurrencies. It indicates investor interest in Bitcoin. High Bitcoin dominance often occurs before and during a bull market, as investors turn to relatively stable, high-market-cap cryptocurrencies like Bitcoin. A decline in Bitcoin dominance often signals that investors are shifting capital to altcoins in search of higher returns.

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