In a remarkable rally, Bitcoin price surpassed the $41,500 mark, fueled by a confluence of factors ranging from market anticipation of a Bitcoin spot ETF to broader financial trends. Here is a detailed analysis of the main reasons for this rally:
ETF Spot Bitcoin n°1: the anticipation game
The buzz around the approval of a spot Bitcoin ETF likely remains the most important driver of the recent price surge. While there hasn’t been a specific update, the market anticipation is palpable, with a FOMO effect kicking in. Last week, Bloomberg analyst James Seyffart suggested that a spot ETF would likely be approved between January 8 and 10, leading the market to respond.
Renowned Bitcoin analyst Willy Woo reflected the anticipation with this statement, “It is very likely that we are on the verge of a Bitcoin spot ETF. The first commodity ETF was SPDR Gold Trust. It offered investors an easy way to access gold in their portfolio. When it was launched, gold experienced an 8-year rise with no year of decline between 2005 and 2012.”
#2 The meteoric rise of gold and its correlation with BTC
The unexpected rise in gold, which surged 3.5% in just 30 minutes to hit a new all-time high on a Sunday afternoon, may have also impacted Bitcoin. This rapid rise in the value of gold could be a sign of more than just market fluctuations; this could reflect deeper economic changes that have direct implications for Bitcoin.
Crypto Analyst @TheFlowHorse REMARK“Unless someone is being executed right now for selling gold short, that says something important. Gold doesn’t arbitrarily rip apart on a Sunday like this, unless that doesn’t mean anything.” Tom Crown, founder and CEO of Crown Analysis, added, “Something VERY BIG is coming tomorrow. Gold just surpassed all-time highs on a Sunday evening. Someone knows something.
#3 Bitcoin Short Squeeze
Liquidation of $65.15 million in Bitcoin short positions, according to Coinglass data, further propelled the price of Bitcoin. The tightening of short positions, combined with strong spot demand, was a key factor. Skew crypto analyst note, “Another big short-term squeeze pushing the price above $40,000. Slight perp premium on Binance during the squeeze, indicating spot selling in the short squeeze.
#4 Whales and institutional buyers
The current Bitcoin price surge has been heavily influenced by whales and institutional buyers. Market analyst Skew highlighted their impact, saying: “Someone is always chasing prices aggressively here. More importantly, whether said large market entity actually allows certain offers to be executed or not. IF filled, they are expected to raise the price. It is clear that $40,000 is the price to pay for institutional players.
Keith Alan, co-founder of Material Indicators, further highlighted the role of these large holders, tweeting: “Bitcoin Whales just passed $40,000.” His statement highlights the significant influence of whales in the rise in the price of Bitcoin. He added: “Earning profits here. $42,000 is a strong probability, but certainly not guaranteed.
Additionally, GreeksLive, a trading tool provider, noted the broader market trend, stating: “Bitcoin surpassed $41,000, Ethereum surpassed $2,200… The giant whale has once again shown his sense of smell before the market. »
December saw a rise beyond expectations, bitcoin surpassed $41,000, Ethereum surpassed $2,200 and continued to rise almost without retracement.
The giant whale has once again demonstrated its sense of smell before the market, since last week to add positions in the block call,… pic.twitter.com/ekD4LiLExs
– Greeks.live (@GreeksLive) December 4, 2023
#5 Liquidity: the underlying strength
The Bitcoin price surge is also heavily influenced by global liquidity conditions, an often overlooked but crucial factor for understanding BTC and cryptocurrency market dynamics. Zerohedge highlighted the scale of this influence in an article: “In November, central banks added $350 billion in liquidity, the third largest increase since March. »
This massive injection of liquidity by central banks around the world plays a central role in the evolution of asset prices, particularly cryptocurrencies like Bitcoin. David Marlin, CEO of Marlin Capital, underlines Due to the importance of this trend in financial conditions, “US financial conditions eased by 90 basis points in November, the largest monthly easing on record (dating back to 1982).”
Adding to this narrative, cryptocurrency expert Charles Edwards commented on the historic nature of this easing, saying: “November saw the most significant easing in over 40 years! Such a significant easing of financial conditions suggests a very conducive environment for investing in assets like Bitcoin, which are seen as hedges against inflation and currency devaluation.
Arthur Hayes, founder of BitMEX, summed up this sentiment by declaring, “Eye on the prize. RRP balances continue to fall and BTC continues to pump. Yachtzee!!!”
At press time, BTC was trading at $41,505.
Featured image from Shutterstock, chart from TradingView.com