Why (and how) has Bitcoin risen 100% year to date? Euphoria over the imminent approval of spot ETFs is not the only cause of the rally. Here’s the truth.
The Bitcoin price temporarily rose above $35,000, a milestone that had not been reached since May 2022. The rally has been fueled by a combination of factors that have contributed to a 100% surge since the beginning of the year and are not unique to the impending approval of Spot ETFs.
These developments have catalyzed the interest of institutional investors and led to a new phase in the evolution of the cryptocurrency market. Let’s see in detail what are the forces at play at the origin of this rise.
The real reason for the rally: an unexpected short squeeze
Since the beginning of the week, Bitcoin has recorded an increase of 13%, now standing at around $34,000. This increase was particularly significant and led to it exceeding $35,000, marking the highest level since May 2022.
One of the key factors behind Bitcoin’s unexpected rally was a short squeeze. Investors who had bet short on cryptocurrencies had to cover their short positions when the price suddenly jumped. This led to the liquidation of positions totaling $275.45 million on Sunday, followed by another $100.44 million on Monday. In total, short liquidations amount to $375.89 million. In other words, the momentum surprised many, and investors who had bet against Bitcoin in the $33,000 range or more had to run for cover.
- Bitcoin’s closure of short positions
- Source: Glassnode
Ryan Rasmussen, an analyst at Bitwise Asset Management, pointed out that investors did not expect such a price movement, which contributed to the enthusiasm and increase in the price of Bitcoin.
- Bitcoin short squeeze
- Source: TradingView
Be careful not to get carried away by FOMO: the price of Bitcoin has almost reached the 38.2% retracement (Fibonacci) of the entire decline that started from the 2021 records. The arrival at these levels, combined with the overbought into which momentum oscillators pour, risks slowing down the bull run, at least in the short term. Over 35,800 dollars, awaiting the test of 42,000 dollars and possibly 48,500 dollars, a real test to test the consistency of the increase.
Bitcoin Spot ETF
The other driver that triggered this rise is the anticipation of the approval of Spot ETFs linked to Bitcoin. The SEC recently refused to appeal the court’s ruling in the Grayscale case, opening the door to the approval of Bitcoin ETFs in the coming months (some say weeks). This momentum has expanded as companies that are looking to launch Bitcoin-related ETFs have updated their filings. Furthermore, prominent investors such as Cathie Wood of Ark Invest and Mike Novogratz of Galaxy have noticed a positive change in the SEC’s attitude towards the cryptocurrency industry.
Bitcoin ETFs would offer investors a way to gain exposure to Bitcoin’s price movements without directly owning the cryptocurrency itself. This approach is considered safer than direct investments in cryptocurrencies, which are notoriously volatile.
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Major financial institutions such as BlackRock, Invesco, Fidelity, and Grayscale have supported the approval of Bitcoin ETFs by filing applications with the SEC. These ETFs are considered a safer investment option than direct cryptocurrency investments, which are known for their speculative nature and price volatility.
Coinbase, one of the leading companies in the cryptocurrency ecosystem, has expressed confidence in the approval of an exchange-traded Bitcoin ETF in the United States. Investors are following these developments closely, as they could mark a major comeback for the cryptocurrency sector.
The role of regulation
In recent years, the cryptocurrency sector has been subject to scandals and legal issues, often related to regulations. The SEC has taken action against several crypto firms, including Coinbase and Ripple, accusing them of violations of securities laws.
Coinbase, Ripple, and other industry firms have criticized the United States for a lack of clarity in cryptocurrency regulations and have threatened to move their operations elsewhere due to restrictions imposed by the SEC.
New rally expected after ETF approval
According to Paul Brody, global head of blockchain at EY, Bitcoin is currently seeing strong demand from institutional investors. However, this application has been held back by the lack of an exchange-traded Bitcoin Spot ETF approved by US regulators. Brody believes that once an ETF is approved, there will be a significant buying rally from institutional investors. This could bring trillions of dollars of institutional investment into the world of cryptocurrencies.
Brody pointed out that many institutions are currently unable to invest in Bitcoin due to regulatory restrictions and that the approval of an ETF would open up new investment opportunities. Experts hypothesize a huge rise in Bitcoin to 180,000 dollars following the halving.
Original article published on Money.it Italy 2023-10-24 19:45:04. Original title: Bitcoin sui massimi da 17 mesi, i motivi del rally (oltre agli ETF Spot)
