A few days ago, bitcoin reached a new price record above $73,000. After disappointing investors' expectations via a sharp correction towards $65,000, the flagship crypto has once again touched the $71,000 mark. Here, in this article, are the reasons which can justify such a comeback.
The main reason for the unexpected rise of bitcoin
Those among the investors who have not been spooked by the recent downtrend of bitcoin can rub their hands. Indeed, since yesterday, the flagship crypto has seen a new rise in power which takes it beyond $70,000.
In fact, the queen of cryptos is currently worth roughly $70,935, having gained 5.75% on its valuation 24 hours ago. A dynamic which caused a shock wave in the crypto sphere and which can be explained by the confluence of several factors.
First of all, the influence of the futures market cannot be neglected. Notably, recent data reveals a staggering total of $184 million in crypto liquidations. Of this total, $56.9 million is in bitcoin in short positions and $16 million in long positions.
Thus, analysts are observing a sharp increase in open interest in the bitcoin futures market. This suggests that a significant number of investors use leverage. That is, they borrow funds to gain exposure to crypto.
Other factors
It appears that some financial news has served as a catalyst for bitcoin's surge. This is notably the case with the London Stock Exchange's announcement of the introduction of exchange-traded notes (ETNs) for bitcoin and ether. A project expected by May 28 which has strengthened the institutional acceptance of the flagship crypto.
Another catalyst is the dynamics surrounding Bitcoin ETFs and the Coinbase premium. According to analysts, they have a significant impact on the rally. Indeed, the positive Coinbase premium gap reflects strong demand for spot Bitcoin ETFs. Coinbase being the custodian of 90% of the assets of Bitcoin ETFs, this is again a sign of the interest of institutions.
Furthermore, from a technical point of view, bitcoin's exit from a descending parallel trend channel on the 4-hour chart would have been a game-changer. The successful test of the resistance zone confirmed the legitimacy of the breakout, causing the price of bitcoin to rise by more than 7%. This boosted the confidence of traders and investors.
Obviously, this surge has as usual captivated the crypto community. However, doubts remain about the sustainability of this upward trajectory amid concerns over debt overhang and the stability of the crypto market. The recent collapse of bitcoin after an all-time high is forcing investors to exercise caution.
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