05 Dec 2023

December Outlook: Running along the front runners

December is poised to be a strong month for Bitcoin and the crypto market as a whole.
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Anticipations are high and building for the early January ETF verdict, and nothing points towards ETF excitement moderating until we enter the final deadline. Thus, my view remains long and constructive for the month to come. ETF hype has been the force swaying excitement back into Bitcoin in the past few months, and now the deadline is approaching. The decisive verdict is expected to occur between January 8 and January 10, 34-36 days from now. This approaching verdict has been the root cause behind the positive momentum since October, with BTC facing relentlessly strong demand from the institutional side of the market.

Big events are “always” front ran in Bitcoin

Lessons from the past suggest that December should be a strong month for Bitcoin, favoring further upside ahead. Bitcoin has a peculiar tendency to push higher and higher as we come closer and closer to major known events as enthusiasm accumulates alongside the narrowing time window. It’s a common feature in crypto markets, often leading prices to be overly meaty once the event occurs but almost always creating tailwinds in the period ahead of its occurrence. In 2017, Bitcoin peaked at the date of CME’s BTC futures launch. In April 2021, Bitcoin peaked alongside Coinbase going public. In September 2021, Bitcoin peaked on the date of El Salvador’s legal tender Tuesday. In November 2021, Bitcoin peaked on the date of VanEck’s spot ETF deadline. Ask yourself, are there any valid reasons to expect this time to be different?

Institutional demand stays sky-high, with no signs of stopping

The demand from traditional investors to add long BTC exposure remains enormous. BTC ETPs globally saw nearly 40k worth of BTC inflows in November, while CME open interest climbed to and has stayed at all-time highs, accompanied by futures premiums pushing to 20%. Institutional flows stay the leading force of Bitcoin’s solid strength, while retail participation stagnates.Meanwhile, offshore flows stay shallow. Bitcoin-denominated open interest in BTC perps sits at yearly lows; funding rates remain constructive. There are zero signs of crypto-native euphoria yet. All in all, these are robust signals reaffirming my view that December is set to be a solid month.

Latent sellers

We have seen a tendency of front running of the ETF deadline since late October. CME exposure has been rolled over, and ETP flows have continued their linear uptrend. Solid profits have been made, and eventually, some will seek to realize gains. Nonetheless, the history above of BTC peaking alongside major events incentivizes traders to wait as we’re still at least 34 days away from the verdict.

My game plan is simple

For December, I will maintain the long entered in September, when the market was wrong. As we approach the ETF deadline, I’ll exit all leveraged exposure and de-risk the portfolio slightly to assess the actual U.S. ETF flows once the cats are out of the bag.
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