In a surprising move, the price of bitcoin has surpassed the $47,000 mark, a feat that has caught the attention of investors and analysts alike. This significant price movement can be attributed to three key factors: the influx of investments in spot bitcoin exchange-traded funds (ETFs), notable activities in the futures market, and a technical breakout of a period of compression. Here's an in-depth look at each of these contributing elements.
The market saw a notable inflow of $403 million into spot bitcoin ETFs on February 8, marking the third-largest net inflow in a single day despite a withdrawal of over $101.6 million from the Grayscale bitcoin Trust (GBTC). Since the launch of these ETFs on January 11, total inflows have exceeded $2.1 billion (over 200,000 btc), demonstrating a growing appetite for bitcoin among investors.
Eric Balchunas, a renowned Bloomberg ETF expert, offered perspectives via X in the unprecedented success of these financial products. He stated: “After just one month on the market, IBIT (from BlackRock) and FBTC (from Fidelity) stand out among the top 25 ETFs by assets, with more than $3 billion each.”
Balchunas delved into the competitive dynamics at play and suggested: “The real invisible force here is competition. “The launch of 10 ETFs on the same day, with some heavyweight issuers, really stimulated a rush of capital inflows, demonstrating an aggressive pursuit of market share.”
Top 25 ETFs by assets after 1 month | Source: X @EricBalchunas
#2 Futures market dynamics and short liquidation
The bitcoin futures market has witnessed a notable short liquidation event, with total liquidations reaching $52.09 million in the last 24 hours, according to data from Glassnode. This event was highlighted by the largest single liquidation order on Bitmex (XBTUSD), valued at $5.11 million.
Biased crypto Analyst commented about the situation, noting: “I would say that most or a decent portion of the revenge shorts fading with the bullish grind were squeezed above $45,000 in the current price area. Spot flows are even more significant here, especially when longs start chasing the price. Note that delinquent discounts decline further towards potential premiums in the future, if there is another downward trend with high delinquent premiums and cash sales, that would likely be the local high of this rally.”
Vetle Lunde, Senior Analyst at K33 Research, observed a recovery of the CME base to levels seen before the ETF influx, with a notable increase in open interest. “The CME base has recovered to pre-ETF levels of 15%. Open interest has increased amid the recovery, growing by 15.6k btc (16%) in the last 3 days. Virtually all of the growth comes from active market participants (not ETFs). The OI of this cohort has recovered to pre-ETF levels,” Lunde commented.
A crucial signal for the recent price movement was provided by the Bollinger Bandwidth (BBW) indicator, which identified a breakout of a period of compression. The BBW fell to 0.11, indicating a period of low volatility and an imminent contraction.
In previous cases, when Bollinger Bandwidth (BBW) fell to similarly low levels, bitcoin witnessed notable price movements soon after, such as NewsBTC bitcoin/bitcoin-mega-squeeze-ticking-time-bomb-10-days/” target=”_blank” rel=”noopener nofollow”>reported. These past events provide information on possible future trends.
On October 13 of the previous year, when BBW hit a comparable low, bitcoin embarked on a significant rally, achieving an increase of over 30% in just 10 days. In contrast, in mid-August 2023, the value of bitcoin saw a 15% decline over a brief period of 8 days. Furthermore, in early January 2023, bitcoin experienced an impressive rise, skyrocketing 40% in just 17 days.
Reflecting on these historical patterns, the BBW has once again proven to be a crucial indicator for predicting the next big bitcoin price move.
At the time of publication, btc was trading at $47,359.
