Sun. Apr 14th, 2024

Bitcoin has quickly rebounded from $ 44,800 to over $ 50,000. There are three main reasons for this.

Bitcoin’s price ( BTC ) quickly recovered from around $ 44,800 to over $ 50,000 in just 22 hours.

There are three main factors behind the rapid recovery: low funding rates, the $ 170 million Bitcoin purchase from Square, and the stabilization of the spot market.

Bitcoin futures funding rates are falling significantly

At the major futures exchanges such as Binance, Bybit and Bitfinex, the financing rate of Bitcoin has fallen to 0.01 percent.

The Bitcoin futures funding rate has been consistently above 0.1 percent throughout the rally from $ 40,000 to $ 58,000.

If the futures funding rate is high, it means the market is crowded with buyers and the rally is likely overheating.

This threatens a so-called long squeeze, which can cause the Bitcoin price to collapse quickly in a short period of time.

With the funding rate returning to 0.01 percent , the risk of a long squeeze is significantly lower, and if there is a new upward trend, the rally could be more sustainable.

Square is buying $ 170 million worth of BTC

On February 24, US payment giant Square bought Bitcoin worth $ 170 million . In October last year, the company bought Bitcoin worth $ 50 million. At the time , Square Amrita Ahuja’s chief financial officer said :

“We believe that Bitcoin has the potential to be a more widespread currency in the future. Acceptance is growing, we want to learn and participate in a disciplined manner. For a company that develops products for a more inclusive future, this investment is a step in that direction . ”
The re-purchase of Bitcoin by Square is very significant as it shows that the company is banking on BTC for the long term.

The Bitcoin price is much higher than last August. This suggests that as the price goes up, so too does institutional trust.

Spot market stabilizes

When the Bitcoin price fell, it was much lower on spot exchanges like Coinbase than it was on futures exchanges.

For example, on February 23, Bitcoin on Coinbase was $ 600 lower than the price it was at $ 44,800.

When the Bitcoin price initially recovered from $ 44,800 to $ 48,000, another bearish test began.

John Cho, director of global expansion at GroundX, said :

“We expected it but didn’t think it would come anytime soon. A solid rebound from here would be ideal. But I am currently seeing some potential retracement support. I believe it is heading towards $ 40,000 and $ 41,000 as that would be a 30 percent correction from an all-time high. “

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