QCP Capital: Will Bitcoin’s Q4 Rally Repeat the Bull Market of 2020

With bitcoin at $55,000 and creeping its way toward the all-time territory of $64,000, will we see a repeat of 2020’s Q4 bull run?

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key takeaways

  • Singapore’s QCP Capital says there are many reasons to be bullish about bitcoin’s future price prospects as the price cruises past $55,000
  • But at the same time, QCP Capital points out that the market of 2021 is different from that in 2020 and some caution is to be exercised before expecting a moonshot

Bitcoin breached the $55,000 mark this week on strong fundamentals and is closing in on its all-time high of $64,000 set earlier this year. But the question is, will the fourth quarter of 2021 be like the bull market of 2020, where bitcoin posted a nearly 180% rally? Maybe, says Singapore’s QCP Capital. 

In a note posted on its Telegram Thursday afternoon, QCP Capital said that the market is “hopeful” a similar rally will occur during the fourth quarter, as bitcoin is up 16% since the start of the week. QCP says that the “speed and size of the move has been surprising” and was likely accelerated by short squeezes on positions that were short bitcoin.

In addition, QCP noted that the stabilization of the Evergrande situation, and warm signals that bitcoin ETFs might soon be approved in the US are reasons for market optimism. 

The fund also points out that institutional interest in bitcoin is once again driving price velocity, pointing to significant increases in open interest on CME Bitcoin Futures, an institutional focused exchange. 

“The premium versus spot of the CME futures has been the highest among the major exchanges This is noteworthy as the CME futures premiums are typically compressed due to the cash-and-carry spread trades that institutional players like to put on. The unusually large premium indicates an overwhelming amount of outright buying,” QCP wrote. 

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2020 bull market flashback

Rewind to the fourth quarter of 2020, and institutional interest in bitcoin, buoyed partially by the Office of the Comptroller of the Currency’s green-light on custodianship of crypto was one of the large driving forces behind the rally that closed off the year. So, in 2021, can the same be repeated?

Perhaps, believes QCP, but there are a few things to be cautious about. 

First, the market is much more leveraged than last year even though the most extreme leverage tools are unavailable to many retail traders. Open interest is more than triple than it was last year, QCP notes, and bitcoin open interest is “reaching levels that tend to precede market sell-offs.”

The fund also noted that the options market continues to point to a nervous market. Bitcoin has only recently recovered from a persistent downside skew to neutral, they wrote. 

QCP noted that they are seeing large demand for Algorand calls this week. While QCP said that it’s been a “laggard” layer-1 protocol in terms of price, the team behind it is working hard on the ecosystem and it’s worth keeping an eye on during the next quarter. 

The price of Bitcoin is currently $54,290, according to CoinGecko, down 1% on-day.

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