bitcoin price has seen a significant rally over the past few days. After plummeting to a low of $49,000 on Monday, btc price has soared to $62,700 during today’s Asian session. btc is up 24% from its Monday low. In the past 24 hours alone, btc is up 7%. Here are the main reasons:
#1 Fading fears of a US recession fuel bitcoin rally
Macroeconomics is the clear driver of price action, as stocks have risen alongside bitcoin. Notably, the US unemployment rate for July rose to 4.3%, the highest in the past four months. This triggered concerns about a potential recession, according to the Sahm Rule. This economic indicator suggests that a recession could be starting if the three-month moving average of the national unemployment rate rises by 0.50 percentage points or more relative to its lowest point in the previous 12 months.
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The initial panic was exacerbated by a jobs report that missed expectations, with just 114,000 new jobs added compared to the 175,000 expected. However, the narrative changed dramatically yesterday with the latest release of jobless claims data. A significant drop to 233,000, down 17,000, marked the biggest decline in almost a year, calming nervous markets.
Mohamed A. El-Erian, president of Queens College Cambridge and chief economic adviser at Allianz, told x that global financial markets reacted to the release of the data and interpreted it as “a relief after last week’s jobless and growth scare.” However, he also warned that “this high-frequency data series is inherently noisy.”
<blockquote class="twitter-tweet”>
Weekly U.S. jobless claims rose to 233,000, below a revised 250,000, a relief after last week's unemployment and growth fears.
The details of this data release will be subject to a heightened level of scrutiny to assess its comprehensiveness and other distributional aspects.… https://t.co/fBqaJVs3sM
— Mohamed A. El-Erian (@elerianm) twitter.com/elerianm/status/1821526299380187467?ref_src=twsrc%5Etfw” rel=”nofollow”>August 8, 2024
Macroeconomic analyst Alex Krüger continues x.com/krugermacro/status/1821668127119392810″ target=”_blank” rel=”nofollow”>elaborated “The market crash triggered by last week’s unemployment and payrolls data has completely reversed, following today’s weekly jobless claims data. The price action and new jobs data confirm what I suspected: that the entire stock market had a crypto-style leveraged purge, driven mostly by positioning, narrative, and mass hysteria, and not so much by fundamentals.”
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Krüger also warned against overemphasizing individual data points: “There is a reason the Fed makes a point of not making decisions on individual data points. Payrolls data can be very noisy. Yet last Friday, much of the market was furious calling for a policy mistake and emergency rate cuts.”
#2 Short position liquidations amplify btc's surge
bitcoin's price volatility also catalyzed a significant amount of short position liquidations. In the past 24 hours alone, 52,413 traders were liquidated, with total cryptocurrency liquidations reaching $222.02 million, according to Coinglass. dataIn the specific case of bitcoin, more than $90 million in short positions were liquidated, making it the third-highest short position liquidation event in the past five months.
Julio Moreno, Head of Research at CryptoQuant, x.com/jjcmoreno/status/1821743668752941522″ target=”_blank” rel=”nofollow”>rinse The impact of these liquidations on the market: “This rally in bitcoin has been mainly due to short positions covering positions in the futures market. Open interest fell, prices rose.”
#3 Buy MicroStrategy?
As the price of bitcoin rose, there was a noticeable increase in demand in the spot market. Cryptocurrency analyst Kiarash Hossainpour x.com/hoss_crypto/status/1821688638087839861″ target=”_blank” rel=”nofollow”>speculated“You heard it here first: I imagine this crazy late-night market buying coming from none other than Saylor. The guy just announced another $2 billion buy the other day. Who else buys in the illiquid hours after the U.S. close on a Thursday night? Exactly no one.”
MicroStrategy, under the leadership of Michael Saylor, bitcoin-buy/” target=”_blank” rel=”nofollow”>announced Last week, the company plans to significantly increase its bitcoin holdings and is preparing to raise $2 billion through a new at-market equity offering, as reported in its Q2 2024 earnings report. The company stated: “We continue to closely manage our common stock and are filing a registration statement for a new $2 billion at-market equity offering program.”
At the time of writing, btc was trading at $61,186.
Featured image created with DALL.E, chart from TradingView.com
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