Bitcoin's Surge Simmers Down: Plunging Value, Volatility, and Future Prospects
Summary:
The surge in Bitcoin's value in 2024, which boosted it to over $49,000, seems to be dwindling, hitting its lowest point this year in mid-January. This reduction coincides with a significant shift in U.S investors adopting institutional investment products. Despite the decline, some market participants remain hopeful for a recovery in Bitcoin's price, especially with its increasing acceptance among financial institutions. The fluctuation in Bitcoin's price continues to be influenced by global economic shifts, regulatory decisions, and the Federal Reserve's monetary policy.
Bitcoin (BTC) experienced a surge in value in 2024, catapulting it to over $49,000. However, this period of growth seems to be fading as the price of BTC hit its lowest point this year on January 15. This decline in Bitcoin's price corresponds with the noticeable increase in U.S. investors' interest in institutional investment products following the green light for spot ETFs.
The spot Bitcoin ETFs made quite a footprint when they were introduced on January 11, driving the Bitcoin price up to $49,000. In the days leading up to the January 10 official authorisation of spot Bitcoin ETFs by the United States Securities and Exchange Commission (SEC) who approved 11 institutional products, the market experienced a sharp increase in implied volatility. This surge in volatility, which peaked at 97% over a week, was three times the amount observed at the lowest point in October 2023, in a period that stretched nearly three years.
The sudden oscillation in the market can be partly traced to futures and options markets hitting multi-year highs. The week that followed the introduction of the spot Bitcoin ETFs witnessed a surge in volume for both markets, resulting in an additional $13.6 billion, with positions worth $3.4 billion closing.
Analyzing the liquidations in the Bitcoin futures market provides a clear picture of the stark fluctuations. The massive liquidations happened concurrently with high volatility. On January 17, liquidation of long and short positions amounted to over $27 million within 24 hours. The majority of this figure, $19.5 million, came from long liquidations being wiped off the market.
When Bitcoin long positions are liquidated in the absence of sufficient buying pressure, the price of Bitcoin takes a hit. Trading volumes for Bitcoin fell by over $12 billion from the peak of $21.2 billion on January 10. Despite the slump in Bitcoin's price on January 17, unrealized profit saw a rebound from a one-month low on January 13.
At present, long-term holders seem to exhibit more caution, and they are rushing to secure their gains, resulting in a 75,000 Bitcoin holdings reduction from the record-high set in November 2023. The drop in trading volume, coupled with the increase in short-term holders, could spell further depreciation in Bitcoin's value.
Although Bitcoin's price continues to be shaped by global economic events, decisions made by regulatory bodies, and the Federal Reserve's monetary policy will also shape its future. Market players are hopeful about a recovery in Bitcoin's price in the long run, especially considering the growing acceptance of BTC among financial institutions. This report does not provide investment guidance or suggestions. Investments and trades involve risks, and it is essential for individuals to do their own research and make informed decisions.
Published At
1/18/2024 12:37:32 AM
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