The price of bitcoin soared past the $52K milestone on Wednesday, reaching $52,056 per unit on Bitstamp at 10:05 a.m. Eastern Time. Bitcoin’s meteoric rise over the past day triggered a wave of liquidated leveraged positions, wiping out $89.28 million in short positions.
‘Sustained High Levels of Illiquid Supply’ Bolster Bitcoin’s Price
After the U.S. Securities and Exchange Commission (SEC) approved the new spot bitcoin exchange-traded funds (ETFs), bitcoin (BTC) prices rocketed to $49K then plummeted to a low of $38,500 on Jan. 22, 2024. Since then, BTC has steadily climbed in value. Over the past two weeks, BTC has surged 21% against the U.S. dollar, propelled by two key factors. At 10:05 a.m. on Wednesday, BTC tapped the $52K mark and currently rests just under that threshold.
First, the new spot bitcoin ETFs have attracted billions in inflows since launching. Blackrock and Fidelity’s offerings in particular have seen massive inflows, breaking 2024 records. The nine newly introduced ETFs have offset outflows from older funds like Grayscale’s flagship GBTC. In short, the ETF’s enormous demand for the already scarce bitcoin (only 900 mined per day) has pushed prices up. The latest data from Coinshares reveals that spot BTC ETFs have attracted a staggering $4 billion in net inflows.
In the latest Alpha Report by Bitfinex, analysts believe investor confidence is growing, and crypto asset inflows have sparked significant new demand. “Investor confidence in Bitcoin is rising, as evidenced by the rise in BTC at the end of last week,” the Bitfinex report details. “We attribute the gain in part to the slowdown in selling of Grayscale’s GBTC funds, and a significant uptick in total crypto asset inflows. Indeed, Bitcoin holdings of the new BTC ETFs are now larger than Microstrategy’s holdings and we expect flows to continue.”
The report adds:
These inflows, coupled with the impending 2024 Bitcoin halving and the sustained high levels of illiquid supply – with more than 70 percent of BTC in the hands of long-term holders – paint an exceptionally bullish picture for BTC price movements.
The second major driver is bitcoin’s upcoming fourth halving event, which will cut its block reward in half from 6.25 BTC to 3.125 BTC after April 19, 2024. Only 9,567 blocks remain until this milestone, which will reduce the daily bitcoin supply from 900 to around 450. Halvings make the already scarce bitcoin even more limited in supply historically causing its value to climb.
Tuesday’s price drop below $49K after the U.S. CPI report has erased massive short positions from derivatives markets. Per Coinglass.com, over $89.28 million in BTC shorts and $39.47 million in ETH shorts were liquidated over the last day. Meanwhile, open interest in bitcoin futures has reached new highs and the aggregated open interest in BTC options has been rising as well.
Source : Bitcoin News by Jamie Redman / Feb 14, 2024