Bitcoin Hike Analysis: The Reason Behind The Surge In Bitcoin Price

On Thursday, Bitcoin price gained $1,000 in less than an hour and reached about $8,000 level after continuously going through a low phase. Experts reveal institutional investors were the primary reason behind the same as due to taxation season, the sell-off pressure was high and brought a dip in the crypto market.

Bitcoin experiences the biggest 1 hr volume in BTC history

Yesterday, the bitcoin price registered a huge gain of $1,000 in just an hour. From $6,800, the prices got up to $7,800 for the first time in about two weeks. The crypto enthusiasts are surely elated, hoping that this might signal the bullish trend in the crypto market.

Not just bitcoin, other cryptocurrencies including Ethereum, Ripple, Dash, and Litecoin also gained in double digits. Coming onto what caused this rise, experts believe there are several factors driving this rally.

For quite a long time, bitcoin has been experiencing a cold weather. Bitcoin has always been volatile, since its inception in 2009, the crypto has gone through extensive up and downs. After hitting its all-time high at $20,000 in December, last year, bitcoin has been continuously sliding. Having said that, the sudden price rise of more than $1,000 in less than 24 hours has been unprecedented.

However, even after the rise bitcoin price is 60 percent lower from its peak and a good 44 percent lower than at the beginning of the year. The surge was driven by the biggest one-hour trade volume in the history of bitcoin. This points out the fact that the rise has been due to speculative positioning.

Also, read: Predicting The True Value Of Bitcoin With Metcalfe’s Law

What is at play here: Institutional investors and a short squeeze

Experts believe the surge has been the result of institutional investors with huge funds in their pockets. According to a senior market analyst, Mati Greenspan, this is what has happened and will continue to happen.

These institutional investors are buying the predictable dip as the crypto market has been going through the sell-off pressure during the taxation season. With bitcoin currently riding at $7,800, it’s easy to get excited about the bullish trend in the market. However, you just can’t simply expect bitcoin among other cryptocurrencies to rise to the moon with the entry of the Wall Street giants.  

Right now, the crypto market needs stabilization and for that bitcoin needs to find support at $8,000 level. Looks like, after missing the chance to invest in the December dip, these institutional investors are all set to leverage it as much as they can.

Moreover, since Wednesday there were about 44,000 short positions open for bitcoin, that dropped down to 26,000 short positions on Thursday. The short selling has been dried quiet dramatically that certainly points towards a short squeeze.

A Short squeeze happens when a huge number of short players are forced to cover by buying their short positions in fear of huge losses. And this short squeeze closed up at the same time as the prices spiked.

The most important question: Will the bounce continue?

The rise in the bitcoin price was triggered by several factors including the end of tax season coming up, regulations, a short squeeze and entry of Wall Street investors.

With the way cryptocurrency exchanges are working on developments and complying with the regulations, it would certainly be supportive of the market.

Though it looks like a bullish trend in sight for the crypto market, at least in the short term as institutional investors pour in, it might not all be rosy from now on. Having said that, if bitcoin do takes another hit, it is likely that the situation won’t be this bad.

Do you think the worst is over and it’s the start of the bitcoin price bullish trend in the bitcoin market?