Bitcoin (BTC) has experienced a significant surge, with its value increasing by 8.5% in just 24 hours, reaching $71,926 on May 21. This jump brings Bitcoin’s price to within 2.5% of its all-time high. Additionally, BTC derivatives are indicating favorable conditions for reaching new all-time highs in the coming weeks.
The 4% daily increase in BTC price seems to be driven by growing optimism surrounding the approval of a U.S. spot Ethereum exchange-traded fund (ETF) and a general market trend seeking protection against inflation. This trend has also resulted in new all-time highs for gold and the S&P 500 on May 20.
Many traders are wondering if the recent surge in Bitcoin’s price was caused by excessive leveraged long positions and what the implications of a spot Ether (ETH) ETF might be.
The stance of regulators has shifted after the U.S. Senate overturned a resolution by the SEC on May 16. This resolution imposed strict capital requirements on banks holding customer digital assets. Senior Bloomberg ETF analyst Eric Balchunas raised the approval odds for the Ethereum spot ETF from 25% to 75% on May 20, influenced by political pressure.
Prior to the Senate’s vote, President Biden had indicated that he might veto any resolution that would reverse the SEC’s policy. However, the Senate’s decision in favor of cryptocurrency adoption prompted a reevaluation at the White House.
The SEC’s chair, Gary Gensler, had previously been hesitant to classify Ethereum as a non-security or indicate any likelihood of approving its spot ETF. However, on May 20, the landscape changed when the SEC reportedly requested updates to the spot Ethereum ETF filings from exchanges like NYSE and Nasdaq.
Despite the potential competition from Ethereum, the introduction of its spot ETF is expected to benefit the cryptocurrency sector as a whole, creating a more favorable environment for investment. The decreasing anti-crypto regulatory stance in the U.S. could encourage more investment managers, including pension funds, to view the sector more favorably.
Bitcoin derivatives are showing a moderately bullish outlook. The increase in Bitcoin’s value on May 21 has led to a rise in demand for BTC long positions through monthly futures. Typically, these derivatives carry a premium of 5% to 10% over the spot price. Data shows that the BTC futures premium has climbed to 14%, the highest in five weeks, indicating moderate bullish sentiment.
Analyzing the options market provides further insights into the dynamics at play. The current -8% skew in Bitcoin options markets reflects a healthy market sentiment, considering the significant increase in BTC price in recent days. This suggests that there is still room for strategic leverage among Bitcoin buyers without the fear of excessive optimism and potential liquidations during unexpected price drops.
According to popular crypto analyst Game of Trades, the bullish momentum could drive Bitcoin up to $80,000, considering key moving averages and channel support.
Please note that this article is for general information purposes only and should not be taken as legal or investment advice. The author’s views, thoughts, and opinions expressed here are their own and do not necessarily reflect the views and opinions of Cointelegraph.