The impressive run of the Bitcoin price seems to be losing steam as the cryptocurrency revisits its support level after a period of strong momentum. In the near term, the perspective seems to be inclining towards the downside, however, an analyst has presented the key reasons why the surge might just be commencing.Thank you for reading this post, don't forget to subscribe!
As of the time of writing, Bitcoin (BTC) is currently priced at $36,550 with a 2% decrease over the last 24 hours. Over the past week, the cryptocurrency has experienced similar declines in line with the overall market sentiment. Only Solana (SOL) has maintained its upward movement during this period.
Driving Forces Behind Bitcoin’s Surge: The Four Key Factors Unveiled
Based on a report from Deribit Insight shared by Marcus Thielen, several factors are propelling Bitcoin towards new yearly highs. Despite the recent price action, these factors remain robust and intact.
Among the factors underpinning the current surge in BTC price, the analyst highlighted the speculation surrounding the decision of the US Securities and Exchange Commission (SEC) on Bitcoin exchange traded funds, the desire of traders for leverage, inflow of fiat through stablecoins, and an increase in the generation of fees within the Bitcoin network.
SEC’s Verdict on Bitcoin ETF
Anticipation around the SEC’s approval of a spot Bitcoin ETF is a key catalyst. The market is still cautious as the second deadline passed without any announcement in mid-October, with the third deadline scheduled for mid-January 2024. The uncertainty surrounding this decision has led to fluctuations in implied volatility, impacting the value of Bitcoin.
Leveraged Positions and Futures Markets
The demand for leveraged positions in Bitcoin, especially through perpetual futures markets, indicates significant interest in trading the BTC/USDT pair. This was evident when the funding premium reached an annualized +28% on November 13.
Moreover, the BTC options market experienced an uptick in actual volatility, signifying an appetite for risk among investors.
The chart below indicates that this metric has moved closer to its 5-year average. However, the analyst suggests that volatility should decrease by the end of the year, foreseeing a sideways trajectory for Bitcoin in the short term.
Fiat Inflows Through Stablecoins
Another significant aspect is the substantial influx of fiat into cryptocurrencies, mainly through Tether’s USDT, indicating the influx of fresh capital into the crypto sector. With over $3.8 billion entering the crypto space in the last 30 days, this influx has had a noticeable impact, especially on altcoins, reflecting a growing confidence among investors.
Rise in Bitcoin Network Activity
This indicates an increase in fee generation activity on the Bitcoin network, reaching $54 million. The report argues that this surge in network usage, partly driven by the resurgence of Ordinals and support from major exchanges, underscores the fundamental strength of the Bitcoin ecosystem.
Despite these positive indications, the lack of SEC approval for a Bitcoin ETF and a reduction in leveraged long positions could hinder Bitcoin from surpassing the $40,000 mark. Nevertheless, the steady inflow of fiat and a resilient, fee-generating Bitcoin network provide reasons for cautious optimism.
The path of Bitcoin is still intriguing as it navigates through regulatory decisions, market maneuvers, and shifting investor sentiment.
Cover image from Unsplash, chart from Tradingview