Over the past nine months, the cryptocurrency market with Bitcoin at its helm, has exhibited trading patterns and an unusual crypto market behavior has been puzzling market analysts and investors alike.
While the digital currency had been locked in a seemingly endless cycle of stagnation, recent developments have sparked an unexpected surge, leaving many to ponder the underlying factors that led to this rapid ascent.
Let’s try to break it down.
Trading Range: For an extended period, Bitcoin hovered around the $28,500 mark. This trading pattern wasn't just a fleeting moment but a consistent trend that persisted for a striking nine months.
Market Anomalies: During this phase, market observers noted unusual behaviors. Bitcoin’s price seemed artificially suppressed, leading to speculation about the presence of a powerful, unseen force in the market.
Consistent Downside Bets: A significant factor in this market anomaly was the role of option sellers. These traders had consistently placed bets on Bitcoin's downturn, a strategy that, until recently, had been profitable.
Naked Short Selling: However, this strategy took a more extreme form with the practice of naked short selling. This aggressive approach became a noticeable market anomaly and began to raise concerns about its impact on overall market structure.
Spread of Insider Knowledge: The awareness of these semi-naked short-selling practices began to percolate among market participants, causing a sentiment shift for BTC on Twitter (now X). The market shorts were quickly posing an existential crisis by the rally that followed.
ETF Headlines and Inflows: Another pivotal element was the influence of Exchange-Traded Funds (ETFs). Headlines about Bitcoin ETFs and the consequent inflows acted as a catalyst, stirring the market from its slumber.
Blackrock Crypto Portfolio: iShares Crypto ETF will seed its portfolio in October, preparing for the Blackrock ETF approval. The seeding process requires collecting initial funds to buy several creation units, Bitcoin, for trading the first day. Blackrock is said to start significant acquisition soon.
Transactions above $100k has touched new ATHs, the Bitcoin ETF ruling fueled by Blackrock crypto ETF seems to be the driving force as per the analysts at IntoTheBlock.
Ignition of the Powder Keg: These factors, combined, acted as a spark to the proverbial powder keg, setting the stage for an explosive market reaction.
Breaking the $32,000 Threshold: Bitcoin's ascent past the critical threshold of $32,000 marked a turning point. This breakthrough was more than a numerical milestone; it represented a shift in market dynamics.
Market Makers’ Reaction: In response to this surge, crypto market makers found themselves compelled to buy Bitcoin to hedge against forced liquidations on their positions. This forced buying added fuel to the fire.
Short Squeeze Phenomenon: This situation led to a classic short squeeze. As the price climbed, those who bet against Bitcoin had to buy back at higher prices to cover their positions, propelling the price even higher. In just a few hours, over a quarter billion dollars worth of short positions were liquidated.
This unexpected surge in Bitcoin's price is a testament to the complex and often unpredictable nature of financial markets. It highlights the interplay of market dynamics and the roles of different participants, from option sellers to ETF influences. The recent events serve as a reminder of how quickly market sentiment can change and the powerful impact this can have on asset prices.
A general advice from the top analysts at Alvatix for long term holders is to sit this one out, the FOMO on this rally is exceptionally high and therefore dangerous. For traders, in case of a pump, the coin has key levels of $38k-$39k, the next point to lookout for if the $35k resistance level is surpassed. Conversely, in case of a correction, $30k is the line that shows the most potential harbor point.
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