Institutional appetite for Bitcoin returns and DeFi tokens surged

In an impressive show of strength, Bitcoin’s price briefly went above $31,000, and technical analysis shows that it looked to stay there as the second quarter closed. Speaking of ending the second quarter, June 30 seemed to be a key date for Bitcoin for two reasons.

On that date, US Personal Consumption Expenditures (PCE) data was released, and nearly $6 billion in Bitcoin options are about to expire. Bitcoin options are the assets’ derivative instruments with a deadline. To put it simply, the deadline is important as a great number of Bitcoin transactions would happen with each side of the derivatives contract attempting to settle their Bitcoin debts.

Market analysts pay attention to key price levels.

As the two events share the same date, BTC/USD hit a local high of $31,268. Market analysts also paid close attention to key price levels. A close above $29,255 would confirm a breakout on the monthly timeframes, with quarterly resistance now forming at $28,872, claims popular trader Rekt Capital.

In fact, this level has been very important for cryptocurrency in the past. In Q1 2023, it was a point of resistance (a kind of price ceiling), and in Q1 2021, it was a point of support (a kind of price floor). During the first half of 2023, Bitcoin’s price went from $16,000 to $30,000, which was a big step forward.

Paying attention to key price levels allowed traders to make similar trading decisions en masse, resulting in significant moves either upwards or downwards.

A noisy Bitcoin market in 2023

This quarter isn’t just a good quarter for Bitcoin. On the whole, this year, Bitcoin’s market has been quite noisy, so it’s harder to remember that the market is technically in the “bear market” since the crypto bubble burst this time last year.

A big reason for this incredible growth is that traditional financial firms are showing more interest in the digital asset as they struggle to push the Bitcoin Spot ETF agenda more and more. ETFs, or exchange-traded funds, are derivative instruments that institutional investors would prefer to hold rather than the actual Bitcoin asset. This could drive Bitcoin adoption further as an alternative investment class for deep-pocketed investors.

More importantly, though, Bitcoin Ordinals, a network that turns Bitcoins into NFTs and tokens, has helped put the spotlight on Bitcoin. Bitcoin, which was not designed to be used for anything more than simple peer-to-peer transactions, surprised everyone as Bitcoin NFTs and “BRC-20 tokens” filled the blockchain spaces with more value than what could be possible.

Related: A Stablecoin has been launched on the Bitcoin blockchain.

Is the Alt Season coming?

The rise of Bitcoin also drove prices in the DeFi space. Aave (AAVE), a protocol for lending and borrowing DeFi, saw its value rise by an impressive 27% in the past seven days. In a similar way, the value of Kava (KAVA), which is an interoperable layer-1 blockchain DeFi platform, went up by 24%. A decentralised lending platform called Compound (COMP) didn’t fall behind either, with a 41% rise in the last week and a total 140% rise over the course of June.

But even though the DeFi boom seems like an exciting signal for a possible “alt season”, some analysts are still worried about the altcoin market as a whole. Notably, a trader who goes by the name “Capo” has expressed concern about the possibility of an altcoin capitulation, which could cause the altcoin market to lose a lot of money if the risks of entering the market at this time are not calculated.

The takeaways

Bitcoin and DeFi tokens experienced significant growth in the second quarter of 2023, but overall, Bitcoin fared quite well in the first half of the year. Aave, Kava, and Compound, three DeFi tokens, all saw significant gains in the past month. While some look forward to an alt-season, there are worries about possible risks to the altcoin market.

Look forward to the next market update in the crypto space!