Bitcoin Surprises Investors with 11% Spike Amid Market Turbulence
Summary:
Bitcoin (BTC) value increased by 11% over eight days following January 23, surprising investors including Arthur Hayes, co-founder of BitMEX. Although Bitcoin failed to maintain the $43,000 support level post-January 31, the price has remained stable, signaling that negative impacts were balanced over this period. Various factors that influenced this price volatility include Grayscale Bitcoin Trust ETF's outflow and the anticipated return of Bitcoin from Mt Gox to its clients. Additionally, recent US inflation data and economic growth have predictably dampened expectations of any impending interest rate cuts from the Federal Reserve this March.
In the week following January 23, Bitcoin (BTC) experienced a boost of 11%, elevating its value from a low of $38,500. Arthur Hayes, co-founder of the BitMEX exchange, did not foresee this turn of events, attributing looming inflationary risks and geopolitical tensions as potential suppressors to Bitcoin and other risk assets' growth. Despite expectations of a downward trajectory for Bitcoin, a spike to $43,000 was observed on January 30.
Bitcoin's valuation failed to maintain the $43,000 support level beyond January 31, however, over the last month, its price has remained relatively stable, suggesting any deterrence has steadied in that timeframe. Some experts attribute this turbulence to the flux caused by the Grayscale Bitcoin Trust ETF outflow and Mt Gox's impending Bitcoin return to clients.
Notably, sell pressure from Grayscale's GBTC ETF has been offset by other key Bitcoin ETFs like those by Fidelity, BlackRock, and BitWise. Hayes' perspective, grounded in macroeconomics, maintains relevance with recent inflation and growth data from the US causing a shift in investor sentiment away from expecting interest rate cuts by the Fed this March.
Concerns heightened with the January 26 announcement from the US government about the sale of 2,934 BTC repossessed from the Silk Road breach, a sum nearing $120 million in value. Analysts point out that this quantity is not significantly consequential considering the vast amounts being absorbed daily by newly launched Bitcoin ETFs.
The question remains whether experienced traders have benefited from the Bitcoin price uptick. Many in the crypto community believe that “whales” and market makers have the upper hand in predicting major price shifts. Though sophisticated trading tools and strategic locations of servers provide short-term trading advantages, professional traders are not invulnerable to considerable losses in volatile markets.
Insights into whale behavior can be gathered through comparisons of leveraging demand now and on January 23. Typically, whales lean towards monthly Bitcoin futures contracts to bypass funding rate inclusion, causing these instruments to trade at a premium of 5-10%. In the past nine days, the Bitcoin futures premium has hovered around 8.5% to 10%, indicating a moderately bullish outlook. Optimistic traders can further push the BTC futures premium beyond 10%.
The recent hike in Bitcoin's price has seemingly caught traders off guard. The BTC options 25% skew shifted from a negative outlook at 8.5% on January 23 to a neutral stance at -5% on January 31. Accordingly, market makers initially expected a decline in prices but moderated their views as the $40,000 level support strengthened.
Given these nuances, professional traders were probably taken by surprise by the fall to $38,250 and subsequent gain of 11% within a week. In essence, professional traders didn't profit from the recent surge in prices. Given their neutral stance on BTC futures leverage, these traders might have to adopt buy positions (longs) if the rally persists. This article is to provide general information and isn't to be regarded as legal or investment advice. The author's perspectives presented here aren't necessarily representative of Cointelegraph's views.
Published At
1/31/2024 8:15:00 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.