Bitcoin and ether have recovered slightly from the looming threat of another major sell-off at the end of this year. Before analysing the trading instruments from a technical point of view, let's consider the Bloomberg Intelligence research. It revealed that in late 2020, the number of investment instruments related to cryptocurrencies worldwide had more than doubled to 80 from 35. Assets in these instruments skyrocketed to $63 billion, up from $24 billion at the beginning of the year.
It is obvious that demand for the cryptocurrency has increased from both retail traders and major investment funds this year. Surging inflation has become a key driver for growth. Speculative interest in this asset type is also growing exponentially, providing bitcoin with high volatility. Notably, back in May 2021, the world's largest cryptocurrency sank by 56% before reaching a record high in November. After that, BTC dropped by 30%. This indicates another wild roller coaster ride. However, such fluctuations in the cryptocurrency market are no longer surprising.
Despite such high volatility, this had no impact on the flow of new money into the market due to aggressive money printing by the world's largest central banks. Thanks to new investment instruments that are based on bitcoin, the first cryptocurrency will most likely remain the leader among other crypto assets in terms of demand in 2022.
Funds
Grayscale Investments LLC is the largest digital asset management company. Grayscale Bitcoin Trust has about $30 billion under management, which makes it one of the largest crypto funds in the world. Major contributors to the company are Galaxy Digital Holdings, the crypto investment management firm of billionaire Mike Novogratz, and Bitwise Asset Management.
While the majority of 2021's fund launches were outside the United States, the October debut of the ProShares Bitcoin Strategy ETF captured the greatest attention. It took just two days for the fund to accumulate $1 billion, making it one of the busiest starts for an ETF on record. The initial surge in interest showed the degree of pent-up demand for crypto exposure among U.S. investors in ETFs. And yet, unlike an ETF directly connected to spot bitcoin, these futures-backed products are vulnerable to so-called roll costs associated with managing contracts. According to Bloomberg Intelligence, it is likely that investor demand would be even higher if ETFs were pegged to the spot market.
It can be seen from the chart that flows into the ProShares fund have stalled, with the ETF down more than 30% since its mid-October launch. Meanwhile, similar products from Valkyrie and VanEck have less than $70 million in assets combined.
Valkyrie is optimistic that flows will pick up in 2022.
Technical analysis of bitcoin
Bitcoin has consolidated around the level of $49,500. If the price breaks through this mark, demand for BTC will increase and the way to the highs of $53,700 and $58,700 will open. If bears come close to the support level of $45,660 again or overcome this mark, it would be a wise decision to wait for BTC to hit the levels of $41,600 and $37,380.
Technical analysis of ether
Ether is currently trading above the level of $3,912, the middle line of the sideways channel, which points to its possible continued upward movement. If bulls manage to consolidate at this level in the near future, ETH will most likely return to the area of $4,140. If the price breaks through this range, the way to the highs of $4,404 and $4,647 will open. If ether comes under pressure again, it will be possible to open long positions in the support area of $3,680. Its breakout is not a good sign for buyers at the end of the year.
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