Elon Musk Says He Supports Bitcoin; Institutional OTC Deals Rise

It is official. Elon Musk supports Bitcoin.

The Tesla and SpaceX founder called the flagship cryptocurrency “a good thing,” adding that it is on the “verge of getting broad acceptance by conventional finance” as he responded to Andressen Horowitz and other prominent investors during a Clubhouse Conversation meetup on February 1.

Big Boost

Mr. Musk’s statements served as one of the biggest and most influential endorsements for Bitcoin, a financial asset ridiculed mostly by traditional financial experts, some of them calling it from a “greatest bubble of all times” to “the mother and father of all scams.”

But the coronavirus pandemic shifted many views towards cryptocurrency.

A super-accommodative Federal Reserve, ultralow interest rates, and more than $3 trillion worth of stimulus aid have underpinned much of the Bitcoin buying enthusiasm during the previous 11 months. Most recently, a former Bitcoin critic, hedge fund Bridgewater Associates LLC’s founder Ray Dalio, said he is looking to add Bitcoin to their balance sheets as a defense against a bearish US dollar.

Mr. Musk, now an official Bitcoin supporter, did not say much about his plans to dump his companies’ cash reserves for Bitcoin. Interpretations among social media influencers went ballistic, nonetheless.

Bitcoin Price Rises

The Bitcoin-to-dollar exchange rate moved modestly higher during the late Asian trading session Monday.

As of 0813 UTC, the pair was up by $655, or 1.98 percent, to $33,792. An hour ago, just around Mr. Musk’s statements, its price briefly rose above its 200-period simple moving average resistance, signaling that bulls are looking to capitalize on the high-profile endorsement.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin breaks above the 200-SMA after Mr. Musk’s endorsement. Source: BTCUSD on TradingView.com

The move upside also appeared as the US dollar softened against rally across the Asian stocks. Earlier, the greenback had found suppport as distressed investors and traders hunted for safe-havens amid an assault on hedge fund short positions by an army of Redditors. The crowd’s focus this week has shifted to silver, which may prompt further demand for hedging assets.

That somewhat coincides with a spike in institutional investments into Bitcoin at the start of this week. Data provided by blockchain analytics firm, CryptoQuant, noted massive BTC outflows from Coinbase Pro wallets to its custody addressess.

“It’s likely to be OTC deals from institutional investors,” said CryptoQuant CEO Ki-Young Ju. “I believe this is the strongest bullish signal.”

Coinbase Pro, Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

The total amount of BTC transferred from Coinbase Pro wallets. Source: CryptoQuant

Meanwille, Green Bridge Associates’ Marc Principato also sees a rally ahead in the Bitcoin market.

“Based on our specific rules, as long as price fluctuates above 27.5K, our outlook will continue to be BULLISH, even within this smaller range bound structure. 27.5K to 30K is a broader higher low area, and in the context of a bullish trend , higher lows often lead to higher highs.”

Mr. Principato expects Bitcoin to hit its previous record high near $42,000.

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