What’s Behind Bitcoin’s Most Recent Surge?

The recent surge in Bitcoin’s price has surprised and captivated the market, reaching a peak of around $35,000 and marking a 16-month high since May 2022, primarily fuelled by growing optimism surrounding the approval of a Spot Bitcoin ETF. 

As reported, Bitcoin (BTC) surged past $35,000 on a recent Monday, with the market continuing its October bull run amid high hopes that a BTC ETF will gain approval in the U.S. This surge saw Bitcoin going up by more than 11% in the past 24 hours to $33,316 at one point, pulling back slightly from the peak but still showcasing a dramatic price increase. Here’s a detailed breakdown concerning the factors driving this surge and its implications:

Spot Bitcoin ETF Anticipation

The buzz around the prospect of a Spot Bitcoin ETF has been a significant driver behind Bitcoin’s Surge. Spearheaded by financial titans BlackRock and Fidelity Investments, this initiative has garnered substantial market enthusiasm. A key court ruling in favour of Grayscale Investments, despite the U.S. Securities and Exchange Commission (SEC)’s reservations, further fortified this optimism. 

The listing of BlackRock’s iShares Bitcoin Trust on the Depository Trust and Clearing Corp is a notable stride towards ETF realisation. While there’s a precedent of Bitcoin futures ETF approval, the Spot Bitcoin ETF remains under the SEC’s scrutiny due to fraud and market manipulation concerns. However, the tide seems to be turning with industry analysts like Elliott Stein and James Seyffart from Bloomberg Intelligence foreseeing an eventual approval of a Spot Bitcoin ETF, potentially ushering in a new era of Bitcoin investment options.

Market Speculation

Market speculation has played a pivotal role in the recent price rally. Last week, incorrect reports claiming BlackRock had secured approval for its fund ignited a 10% intraday price surge. Moreover, refuted news about an iShares Spot Bitcoin ETF approval by the SEC spurred a market reaction, catapulting Bitcoin prices to $30,000 within an hour. Additionally, ‘whale activities’ and a ‘renewed interest from retail investors’ as highlighted in the second article, further contribute to the speculative nature of the market, often resulting in substantial price movements within short durations.

Technical Analysis: 

A technical analysis further underpins the bullish market sentiment. Recent analysis from TradingView highlighted that Bitcoin experienced an upward momentum after finding bids around the $29,328.04 level, with subsequent buying pressure around the $29,670 area. The CoinDesk Bitcoin Trend Indicator BTI, which measures the directional momentum and strength in bitcoin’s price action, switched to a “significant uptrend” as BTC strengthened its footing above the $30,000 level, as noted by Todd Groth, head of research at CoinDesk Indices. 

The analysis also identified several key resistance and support levels, suggesting that technical resistance is expected around $31,986.16 to $34,658.69, providing a technical basis for the bullish expectations in the market. The rally was also accompanied by a surge in trading volumes, an indicator of heightened market activity and interest.

Long-Term Growth

Bitcoin’s long-term growth trend further supports the optimistic market sentiment. From December 2020, when Bitcoin was trading at just under $29,000, the cryptocurrency has shown significant price growth, highlighting its potential for further appreciation.

Options Positioning

Alex Thorn, research head at digital asset investment firm Galaxy, provided insights into the complexities of the options market and their potential impact on Bitcoin’s price. The chart below, sourced from Galaxy Research, visually represents dealer gamma positioning at various BTC price levels.

Thorn elaborated on the significance of this chart, stating, “At its peak around $32,500, almost $20 million of BTC will need to be purchased by options dealers for every 1% move up to stay delta neutral.” This statement is illustrated by the pronounced spike in dealer gamma around the $32,500 mark.

He further emphasised the potential consequences of this positioning, noting, “This positioning implies market makers would need to buy back increasing amounts of delta as the spot price moves higher.” Such dynamics suggest that the need for option dealers to maintain their hedges could amplify any upward price movement, making it more explosive in the short term.

In summary, the recent spike in Bitcoin’s price to approximately $35,000 is largely driven by optimism for a potential Spot Bitcoin ETF approval, spearheaded by industry leaders like BlackRock and Fidelity. Favorable court rulings and market speculations have further fuelled this bullish sentiment. Technical analysis and a surge in trading volumes corroborate this positive outlook, although the market’s speculative nature and regulatory uncertainties call for cautious optimism among investors. 

The intertwining factors of ETF anticipation, market speculation, and Bitcoin’s historical growth suggest a maturing market poised for new investment avenues, with regulatory developments poised as pivotal influencers on Bitcoin’s future price trajectory.