What's behind the current increase in Bitcoin's price?
The surge in Bitcoin's price today, propelled above $38,000, is evoking a sense of a bull market among both retail and institutional investors.
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Today, Bitcoin's price has experienced an upswing, reaching an intraday high of $37,972 before retracing below the $37,000 mark. The rally to a new year-to-date high is attributed to the excitement surrounding a potential Bitcoin exchange-traded fund (ETF), causing a wave of short liquidations and driving prices higher across the cryptocurrency market.
Bitcoin price. Source: TradingView
Despite various macroeconomic challenges, Bitcoin has managed to maintain an upward trajectory, boasting a remarkable 121% year-to-date gain. Options market data indicates that traders are positioning themselves for a potential move towards the $40,000 level. The recent price movement has propelled the Crypto Fear and Greed Index to its highest level since Bitcoin's all-time high of $69,789 in November 2021.
Fear and Greed Index. Source: Newhedge
The anticipation surrounding a spot Bitcoin ETF has been a significant driver of market sentiment. In mid-October, there was a flurry of spot Bitcoin ETF filings, and the first window for the Securities and Exchange Commission (SEC) to approve the 12 outstanding ETFs opened on November 9.
Despite multiple applicants, including major names like BlackRock and Fidelity, the SEC has consistently withheld approval for a spot Bitcoin ETF. The current approval window extends until November 17, with a potential extension until January 10 if the SEC follows its pattern of delaying approvals. Reports suggest that approval could generate up to $600 billion in new demand, and analysts at CryptoQuant believe it could result in a $1 trillion increase in Bitcoin's market capitalization. Galaxy Digital predicts a 74% price increase in the first year following a spot Bitcoin ETF launch.
BTC balance on exchanges. Source: Coinglass
Simultaneously, Bitcoin liquidations have surged as the supply on exchanges has dropped below the peak observed on May 3, 2023. The decline in exchange supply, coupled with the perception that coins leaving exchanges signal a bullish trend as traders opt for long-term self-custody, has contributed to positive market sentiment. Long-term Bitcoin holders recently hit an all-time high, acquiring 92% of all newly minted BTC on November 7.
Bitcoin liquidation data. Source: Coinglass
In the past 24 hours, over $126 million worth of Bitcoin shorts have been liquidated, with a significant portion occurring within a 12-hour timeframe, totaling over $74.6 million. This surge in liquidations, combined with Bitcoin leaving exchanges, is seen as a factor contributing to the current bullish momentum. Breaking through the key resistance level of $37,000 has instilled confidence in upward buoyancy for Bitcoin's price, leading analysts to believe that the cryptocurrency's price upside has gained momentum.
