On the morning of October 24th, the cryptocurrency market experienced volatility after Bitcoin surged past $35,000 in just a few short minutes. Here are five reasons why Bitcoin is reaching its peak since 2022.
Reason 1: BlackRock’s Spot Bitcoin ETF Approval Looms Large
The recent surge in Bitcoin’s value can be attributed to the growing anticipation surrounding the potential approval of a Spot Bitcoin ETF, with particular attention focused on BlackRock’s involvement. The heart of this surge lies in the prospects of BlackRock’s Spot Bitcoin ETF gaining regulatory approval.
Notably, finance lawyer Scott Johnsson shed light on key developments in BlackRock’s recent S-1 filing amendment. He highlighted the acquisition of a CUSIP, a unique identifier for financial instruments, suggesting preparations for an imminent launch. Johnsson also hinted at the possibility of BlackRock seeding the ETF with cash this month.
Adding fuel to the speculative fire, an image circulating on financial platforms showcased the listing of BlackRock’s iShares Bitcoin Trust on the Depository Trust & Clearing Corporation (DTCC) under the ticker IBTC. This listing on a major financial infrastructure institution fueled further speculation, with Bloomberg’s Eric Balchunas underlining that this step is part of the process leading to the market launch of an ETF.
However, amid the growing optimism, Bloomberg’s James Seyffart provided a note of caution, emphasizing the absence of a fixed timeline for the approval. He noted that the approval process could unfold in a matter of days, months, or even years, introducing an element of uncertainty to the otherwise enthusiastic market sentiments.
Reason 2: Grayscale’s ETF Dispute Reaches A Conclusion
The DC Circuit Court of Appeals made a final decision, forcing the SEC to reconsider its earlier choice to reject Grayscale’s proposal. This proposal was about changing its Grayscale Bitcoin Trust (GBTC) into a spot ETF.
The court’s decision supports its initial judgment from two months ago, where it criticized the SEC’s rejection as being “arbitrary and capricious.” The SEC chose not to challenge this ruling, so the court’s recent action is more of a procedural step.
Now, the focus is back on the SEC, and they have to decide whether to approve Grayscale’s application or reject it for different reasons. Even though this is a procedural move, it adds to the growing idea that the SEC might be gearing up to approve a spot ETF soon.
Reason 3: Bitcoin Short Sellers Are Squeezed
A big part of the market found themselves in a tricky situation. Those betting against Bitcoin (short sellers) had a tough time. According to Coinglass’s data, a massive $161 million worth of Bitcoin futures shorts were closed out just yesterday, and an extra $35 million more today. Julio Moreno, who heads research at CryptoQuant, highlighted this interesting trend, saying that the rise in Bitcoin’s price is mainly because those who bet it would fall had to change their positions. As the price went past $31,000, there was a noticeable decrease in Open Interest, which is the number of outstanding futures contracts.
Adding more details, Joe Consorti, a market analyst with The Bitcoin Layer, said, “When Bitcoin shot up to $31,000, there was a clear increase in futures positions, similar to what happened when it went from $25,000 to $30,000 in late June. Rises in price driven by people borrowing money to trade can be risky, like building something on shaky ground.”
Reason 4: TWAP Buying and Coinbase Premium Trend
In a fascinating analysis that caught the attention of the crypto community, Skew, a well-respected analyst, pointed out an interesting behavior in Bitcoin’s trading. They noticed a consistent buyer using a strategy called TWAP since Bitcoin reached around $30.6K. This TWAP buying seems to have a more noticeable impact on the price this time.
Breaking down the details, Skew mentioned, “It looks like there’s about 500k clips approximately every hour, which would be around $6 million. Over five instances, this would add up to $30 million.”
For those not familiar, TWAP stands for “Time Weighted Average Price,” and it’s a way of trading using an algorithm. The goal is to execute orders over a set time, making sure that the average price during that period is achieved. This method is especially useful for large orders, preventing big price swings in the market. In simple terms, it suggests a big player, possibly an institutional investor, making significant Bitcoin purchases.
Skew also brought up the Coinbase factor: “BTC Coinbase Spot: With such consistent TWAP buying, there needs to be enough liquidity to accommodate this buyer. Currently, it seems like market makers are the ones selling to this buyer. Looking at the order book, there seems to be a bit more asking to sell around the $37K price.”
This observation aligns with what CryptoQuant CEO Ki Young Ju noted about the sudden increase in the BTC Coinbase premium, saying, “BTC Coinbase premium just went through the roof.”
Reason 5: Maximum Discomfort for Gamma Shorts in the Options Market
The somewhat complicated world of the options market has played a significant role in influencing Bitcoin’s recent price changes. Alex Thorn, who leads research at Galaxy, highlighted this phenomenon, saying, “We are getting close to the point where gamma shorts are feeling the most pain.”
Recently, NewsBTC shared an important insight: the way options market makers in Bitcoin were positioning themselves had the potential to make any upward movement in Bitcoin’s price more intense in the short term. Alex Thorn expanded on this, explaining, “Options market makers in Bitcoin are increasingly betting against price increases as the actual BTC price goes up. […] This is likely to make any short-term upward movement more explosive.”
To emphasize this pattern, Thorn referred to data from Amber, saying, “When Bitcoin reaches $32.5k, market makers have to buy $20 million worth of assets for every subsequent 1% increase in price.” It seems Thorn’s analysis was right on the money.