Bitcoin marches towards 35,000 US dollars – What’s behind it?
While Bitcoin climbs almost unstoppably, Ether can climb back above 800 US dollars for the first time.
Bitcoin (BTC) has climbed above the US$34,700 mark, which is also a new record high for the market-leading cryptocurrency. Meanwhile, Ether (ETH), the market’s second largest cryptocurrency, has cracked the US$800 mark for the first time since May 2018.
Bitcoin’s renewed upswing comes as a bit of a surprise in this regard, as the price had initially fallen back to 30,300 US dollars with a sharp downturn on 2 January. Within just 24 hours, however, BTC has now by Bitcoin Aussie System improved from 30,300 to an interim high of 34,778 US dollars, a daily gain of 14%.
What was the trigger?
When Bitcoin was still above US$33,000 on 2 January, some major investors had already warned that even a sell-off of 150 BTC could send the market plummeting.
The anonymous Bitcoin trader „i.am.nomad“ had written accordingly:
„A 150 BTC sell-off would topple this whole bull run, because the higher the price is pushed, the more the small retail investors are pushed out of the market, making support for a downturn all the lower.“
Shortly after he pointed to the risk of thinning order books, the bitcoin price did indeed head down.
However, the market-leading cryptocurrency quickly recovered from this, leading to the new record high mentioned at the beginning of this article within 24 hours.
The driving forces behind this sudden upswing are the increased buying by institutional investors via the crypto exchange Coinbase and a so-called „short squeeze“ on Binance Futures.
As Cointelegraph had reported, Bitcoin has been trading significantly higher on Coinbase than on other major crypto exchanges over the past three days.
So even though the price value here was above market value, aggressive large investors kept buying, pushing the price up all the more.
Meanwhile, on Binance Futures, a trading platform for crypto futures, many traders had „shorted“ Bitcoin in anticipation that the market-leading cryptocurrency would not make it past the US$30,000 mark. However, when the Bitcoin price was then pushed up by excessive buying on Coinbase, this plan backfired. Short traders were suddenly forced to buy more and more Bitcoin as well to cover their positions, which only pushed the price up further (the aforementioned „short squeeze“).
One analyst noted in this regard:
„Those who had hoped #Bitcoin would crash to start 2021 are being shown once again how hard it is to be a short trader over the last 10 months by the new record high of over US$34,000. Bitcoin’s average gain hasn’t been as high as it is right now since June 2019.“
The price of Ether, the cryptocurrency belonging to the Ethereum blockchain, has been able to pull itself up in Bitcoin’s slipstream. For example, the price of Ether has climbed above $800 for the first time since May 2018, proving that the market-leading „altcoin“ is on the upswing again after mostly going sideways for it in December.
The anonymous trader „Mayne“ had already predicted on 2 January, even before this upswing had occurred, that ETH would head back towards 800 US dollars. Thus he wrote:
„My thesis for ETH remains valid. As long as the daily close is above 620 US dollars, it will head towards 800 US dollars. I built a big long position in December and as long as ETH makes a higher low, everything goes according to plan. I should have bought more bitcoin in December, though, so I’m hoping ETH has a stronger January now.“
Where to next?
However, another catalyst is already within reach for Ethereum, with options exchange CME set to launch ETH futures in February.
Given the huge institutional demand for bitcoin since Q1 2020, it’s entirely conceivable that institutional investors will be similarly keen on ETH futures, which could give the second-placed cryptocurrency a decent boost.