Bitcoin has achieved a remarkable milestone by reaching a new all-time high (ATH) of $69,300, a level not seen since the last bull market peak over two and a half years ago.
The journey since November 2021 has been a challenging one for Bitcoin (BTC), as it lost momentum and entered a prolonged crypto winter. However, the beginning of 2023 brought signs of hope as the price of BTC started to climb steadily, entering a new phase of price discovery.
Now, as Bitcoin enters this price discovery phase, investors and traders are uncertain about what to expect. Without historical data to guide them, there are no resistance or support levels to rely on. To gain some insight, Cointelegraph consulted Bitcoin educator and veteran crypto investor Chris Dunn, who predicts that Bitcoin will continue to reach even higher highs in the short term.
In the past year, Bitcoin has seen steady growth, but since February 16, the price has experienced significant surges, with mega green candles driving the price up by 25%. This caught many Bitcoin short traders off-guard. On February 27, another giant green candle raised the price by 25% again, breaching the $60,000 level.
These unexpected price movements led to the liquidation of $161 million in BTC shorts within 24 hours, resulting in a total of $268 million in damages. When short positions are liquidated, traders who bet on the price of Bitcoin falling are forced to cover their positions by buying back the Bitcoin they sold, often at a higher price. This sudden surge in buying pressure can cause a rapid increase in the price of Bitcoin.
The liquidation of shorts can trigger a cascade effect known as a short squeeze, where short sellers rush to buy back Bitcoin, driving the price even higher. This can lead to significant volatility in the Bitcoin market.
The recent approval of spot Bitcoin exchange-traded funds (ETFs) by the United States Securities and Exchange Commission has had a profound impact on the rapid increase in Bitcoin’s price. Inflows into these new financial products have been relentless. BlackRock’s iShares Bitcoin Trust, for example, surpassed $10 billion in assets under management in just over seven weeks.
This contrasts with the first U.S. gold-backed ETF, which took two years to reach the $10 billion mark after its launch in 2004. This ETF inflow phenomenon has far outperformed gold, according to market analyst and Reflexivity Research co-founder Will Clemente.
Dunn emphasizes the significant role that Bitcoin ETFs play as an entry point for Wall Street and institutional investors. The injection of capital into spot Bitcoin ETFs continues to increase, with net inflows of $562 million on March 4 alone.
This increased demand for Bitcoin from spot ETFs leads to more BTC being purchased from the open market, driving the price higher.
As this story continues to develop, more information will be added when available.