bitcoin‘s price rally is losing steam as the cryptocurrency returns to its support levels following weeks of bullish momentum. In the short term, the outlook seems tilted downward, but one analyst laid out the main reasons why the rally has only just begun.
At the time of writing, bitcoin (btc) is trading at $36,550 with a loss of 2% in the last 24 hours. During the previous week, the cryptocurrency recorded similar losses following the general market sentiment. Only Solana (SOL) maintained its gains during the same period.
Behind the rise of bitcoin: decoding the four key factors
According to a bitcoin-price-surge/” target=”_blank” rel=”nofollow”>report According to Deribit Insight, published by Markus Thielen, several forces are pushing bitcoin towards new yearly highs. These forces remain intact despite the recent price action.
Among the reasons behind the current btc price rally, the analyst included speculation about the US Securities and Exchange Commission’s (SEC) bitcoin Exchange Traded Fund decision, traders’ appetite for leverage , fiat inputs through stablecoins, and increased fee generation within the bitcoin network.
SEC Decision on bitcoin ETFs
One important factor is the anticipation surrounding the SEC’s approval of a spot bitcoin ETF. Despite passing the second deadline in mid-October without any announcement, the market remains vigilant and the third deadline is set for mid-January 2024. The uncertainty surrounding this decision has caused fluctuations in implied volatility, which has influenced the value of bitcoin.
Leveraged positions and futures market
The demand for leveraged positions in bitcoin, primarily through perpetual futures markets, indicates strong interest in trading the btc/USDT pair. This was evident when the financing premium reached +28% annualized on November 13.
Additionally, the btc options market saw an increase in realized volatility. The increase in the metric indicates risk appetite for investors.
The chart below shows that the metric is approaching its 5-year average. However, the analyst believes that volatility should decrease as the year ends, suggesting that bitcoin will follow a sideways trajectory in the near term.
Fiat Influence through Stablecoins
Another crucial aspect is the significant influx of fiat money into cryptocurrencies, primarily through Tether’s USDT, indicating new capital entering the crypto space. With over $3.8 billion invested in cryptocurrencies in the last 30 days, this influx has had a notable impact, especially on altcoins, reflecting growing investor confidence.
Increased bitcoin network activity
The generation of commissions from the bitcoin network indicates greater activity, reaching $54 million. The report states that this growth in network usage, driven in part by the resurgence of Ordinals and support from major exchanges, underscores the fundamental strength of the bitcoin ecosystem.
Despite these positive indicators, the absence of a bitcoin ETF approval from the SEC and a reduction in leveraged long positions could prevent bitcoin from surpassing the $40,000 mark. However, ongoing strong fiat inflows and a robust fee-generating bitcoin network provide reason for cautious optimism.
bitcoin‘s journey continues to be captivating as it navigates regulatory decisions, market strategies, and evolving investor sentiment.
Cover image from Unsplash, chart from Tradingview
