After an active morning, bitcoin remained virtually stable in the $87,500 area in US afternoon trading, maintaining gains of around 2% in the last 24 hours. Altcoins, including ether , and sunny showed similar bullish action.
Cryptocurrency-related stocks also saw rebounds after Monday’s decline, including a 3% gain for Strategy (MSTR) and a 1% advance for Coinbase (COIN).
Read more: Bitcoin rebounds from Monday’s worst levels, but may hit below $80,000 next, analyst says
“Customers are positioned with cautious optimism,” said Josh Barkhoarder, head of sales at FalconX. “In the short term, most expect cryptocurrencies to remain range-bound until we see a clear catalyst, so they maintain core exposure to bitcoin and hold cash elsewhere.”
BTC May Benefit from Rebalancing, Says Analyst
As the year-end approaches, bitcoin may benefit from its slow performance compared to other asset classes during the quarter as asset managers rebalance their portfolios to maintain their mandatory allocation, said Vetle Lunde, head of research at K33.
Earlier this year, when BTC underperformed the S&P 500 index during the first quarter, it started the next with gains, according to Lunde. On the contrary, when BTC outperformed stocks in the second quarter, it recorded declines at the beginning of the third.
So far in the fourth quarter, bitcoin has underperformed the S&P 500 by a whopping 26%, suggesting that considerable rebalancing is necessary.
“Fund managers with predetermined BTC allocation targets may adjust weights towards the end of the year, which could lead to excess inflows during the last trading days of the year and into early January,” Lunde continued.
Cryptocurrency traders are hesitant
Even as prices stabilize, market participants remain hesitant to take on new risks, K33’s Lunde added.
Derivatives activity on the Chicago Mercantile Exchange (CME) remains near yearly lows, with BTC futures open interest hovering around 124,000 BTC, he wrote. In perpetual swap markets, funding rates hovered around the neutral rate and open interest showed little movement, indicating a lack of near-term directional conviction.
The decline in cryptocurrency spot trading volumes, down 12% from last week, also confirms that many traders remain reluctant to participate as the year draws to a close.
