The price of bitcoin has always been a closely monitored datapoint in the world of digital currencies given that it’s pretty much the touchstone for cryptocurrencies. And this week, the cryptocurrency’s price shot above $34,500 per token, further cementing its position at the top of the pile.
At the time of publication, one bitcoin was worth around $34,800, up 23.4% on the week and 109% from $16,625 at the beginning of the year, according to CoinMarketCap. On Monday, the cryptocurrency almost reached $35,000, marking its highest price since May 2022, when the Terra/LUNA collapse led to a sharp decline in the value of most digital tokens.
Bitcoin’s price had been rising “very smoothly for eight weeks, suggesting an accumulation phase, and early last week, it fired off several important bull market transition signals at once,” Alex Kuptsikevich, the FxPro senior market analyst, told TechCrunch+. “These signals provided an opportunity to break through the 50-day moving average . . . These bullish victories attract a wide range of investors and traders to focus on these signals.”
Not everyone is cheering these gains, though. The recent run has been the “perfect storm” for market participants who have been shorting bitcoin, John Glover, chief investment officer at Ledn, said.
What is driving the hike?
The primary driver of this week’s price moves has been the anticipation and “high likelihood of the approval” of a bitcoin spot exchange-traded fund (ETF), according to Michael Silberberg, head of investor relations at Alt Tab Capital.
There has been ample market speculation around a possible bitcoin spot ETF and the potential such a fund holds for unlocking new demand for bitcoin itself. More demand could lead to rising prices since the supply of bitcoin is limited, and some traders may be working to get ahead of any future value gains.
Many traditional financial players aren’t allowed to trade spot market cryptocurrencies yet, due to regulation and compliance matters. So they do it through other regulated products like bitcoin futures.
There is a belief that a bitcoin spot ETF will allow for much pent-up institutional interest to flow in through these ETFs, Bradley Duke, chief strategy officer at crypto ETP provider ETC Group, said. “This will put upward pressure on the price of bitcoin.”
Still, the road to a bitcoin spot ETF has been bumpy. Last week, a false report surfaced of BlackRock’s ETF application being approved, which caused a slight pump in the value of bitcoin.
And earlier this week, Eric Balchunas, a senior ETF analyst at Bloomberg, posted on X (formerly Twitter) that BlackRock’s iShares Bitcoin Trust was listed on the Depository Trust and Clearing Corporation (DTCC), which clears NASDAQ trades. While this seemed like a new development (and helped drive bullish sentiment), the ticket has actually been posted on DTCC since August; most people just didn’t notice it until recently.
On Monday, the D.C. Circuit Court of Appeals closed the June 2022 suit between the U.S. Securities and Exchange Commission (SEC) and digital asset manager Grayscale, with a final ruling that ordered the government agency to rescind its rejection of the firm’s bitcoin spot ETF application. The court of appeals had ruled in favor of Grayscale back in August, calling the SEC’s denial of the product “arbitrary and capricious.”
According to Stefan Rust, CEO of independent inflation data aggregator Truflation, the ETF futures trading volume on the Chicago Mercantile Exchange has been going up as a result of investors betting on the spot ETF being approved.
There are other factors at play, too
While a potential bitcoin spot ETF is the most obvious factor driving up the cryptocurrency’s price, there’s more going on here. Some traders anticipate bitcoin’s price to increase in line with historical patterns leading up to bitcoin halving, which happens roughly every four years and is due in about late April 2024.
The institutional market has also increasingly been accepting of bitcoin — outside of pending spot ETF approvals. Earlier this week, FTSE Russell launched a joint crypto index business with Grayscale to help grow institutional education and adoption in the space, Fiona Bassett, CEO of FTSE Russell, and Michael Sonnenshein, CEO of Grayscale, shared at a private dinner on Monday that TechCrunch+ attended.
Still, all this excitement around bitcoin spot ETFs is somewhat reminiscent of what happened in 2017, when the expansion of crypto products and services to institutions did not translate into a price spike, Kuptsikevich said. “And now, it could be that the influx of new money into cryptocurrencies from launching a new instrument is overrated, and many companies interested in bitcoin already have it.”
“The market positioning — a lot of outright shorts coupled with a lot of negative gamma — was a big contributor to this [moving] higher in price,” Glover said.
In simple terms, negative gamma is a result of traders selling options. As the spot bitcoin price moves higher, those with negative gamma will be forced to buy bitcoin to hedge themselves, and those who don’t will be liquidated on an exchange, Glover added.
“Once the market began to recognize the size of positions of those who are outright short or had negative gamma, we started to see sustained buying in the market,” Glover said. “This was exacerbated by the retail participants coming back in as the posts of the likelihood of a sooner-rather-than-later approval for all of these BTC ETFs started hitting the market.”
Going forward
As with any asset class, it is always hard to know what is simply short-term bullish sentiment or a sustainable bull run, Duke said. “Only time will tell.”
But any time the market has moved upward sharply, some retracement is likely, Silberberg said. “That remains true in this case. However, we expect to continue to see higher lows during price fluctuations, as overall market enthusiasm has increased.”
In the near term, market players think bitcoin’s price is likely to retract within the next week or two, unless more bullish news comes out regarding spot bitcoin ETFs in the U.S.
“I’ve been hearing people say that this is the beginning of the bullish cycle,” Glover said. “We’ve been in a bull cycle since November of last year, when BTC hit sub-$16K. This is just the next leg up in the cycle.”
Glover believes this upward movement is sustainable given the recent historical data over the past 11 months, and expects bitcoin to hit $45,000 in the coming months based on his weekly technical analysis. Still, he noted that “markets never move in a straight line and we will see pullbacks in the price action.”
Rust feels this is the beginning of a “crypto spring” that will give the market a signal to move on from the prolonged winter it has been foundering in.