After skyrocketing 32% in 20 days, why can Bitcoin rise to $57,000?

Jaleel加六and others3Authors

24-02-28 21:35

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Bitcoin rose by 10% in the past 24 hours, which many insiders consider a sign of a bull market.

At 3am Beijing time, Bitcoin experienced a "late-night rally" and successfully broke through the $54,000 mark. At 10am this morning, it was expected that the market might take a break, but Bitcoin continued to show strong momentum and broke through $57,000 in a short period of time. The cumulative increase in the past 24 hours reached 10.06%, reaching a new high since January 2022. This is also the continuation of Bitcoin's trend since the Chinese New Year in 2024. Within 20 days since February 7th, Bitcoin has increased by 32.5% from $43,000.

The surge of Bitcoin has led to a general rise in the prices of Bitcoin ecological tokens. Among them, STX has risen by 22.21% in the past 24 hours, RIF has risen by 15.97% in the past 24 hours, and ALEX has risen by 20.8% in the past 24 hours. In the past 24 hours, the total liquidation amount of the whole network was 335 million US dollars, with 77.57 million US dollars of long positions and 258 million US dollars of short positions being liquidated.

What's even more impressive is that the stock prices in the US have also risen significantly, with Coinbase (COIN.O) trading at $193.94 at the time of writing, up 27.96% in the past 24 hours, and Microstrategy trading at $796.48, up 109% in the past 24 hours.

In the ranking of total BTC contract positions, CME is leading with 1.35 billion USD, with a 24-hour increase of 9.59%, ahead of Binance.

On an unremarkable Tuesday, the ETH Denver conference proceeded as scheduled. Despite the belief that "whenever there's a conference, the market will drop," both BTC and ETH saw breakthroughs. The price of Bitcoin, measured in Chinese yuan, is even about to surpass the highest point in November 2021.

ETF Fund Net Inflow

Since the SEC approved the Bitcoin ETF application on January 11th, there have been 11 Bitcoin ETFs listed. In the past 40 days, the bullish trend in the crypto industry has become more apparent, which is closely related to the growth of net inflows into ETFs.

As of February 25, 2024, the number of bitcoins held by 11 ETFs increased from 619,491 to 732,549, with a total increase of 113,058 bitcoins. The total holdings of bitcoin ETFs is 732,000 bitcoins, and the management fund size increased from $28.59 billion to $37.21 billion, with a total increase of $8.6 billion in fund size.

Currently, the holdings of Bitcoin ETF account for 3.73% of the total supply, which exceeds the amount of Bitcoin in 596,000 Binance exchange wallet addresses (coincarp data). The holdings of the top 30 Bitcoin spot exchanges currently stand at around 1.2 million (excluding the amount held in ETF custody). Based on the net increase of 110,000 Bitcoin holdings, the direct increase in circulation demand brought by ETF accounts for approximately 9.34% of the cryptocurrency market, which has a direct impact on the growth of Bitcoin prices.

Among all the ETFs issued, except for Fidelity's self-custody of 91,000 bitcoins, almost all other ETF funds have chosen Coinbase as the custodian for holding bitcoins. Coinbase currently holds 637,000 bitcoins for ETF issuers, accounting for 86.9% of all ETF holdings, surpassing Binance's holdings of 590,000.

Although the Bitcoin ETF was approved on January 11th, the price of Bitcoin experienced a sharp drop from $49,000 to $38,500 in the days following its approval. The main reason for this significant drop was due to Grayscale's selling off of Bitcoin. After selling off Bitcoin, Grayscale's holdings decreased from 617,000 to 445,000, but it is also clear that Grayscale's selling off amount is decreasing. From selling over 10,000 Bitcoins in early January to only selling a few hundred Bitcoins to Coinbase Prime address in the most recent sale.

Meanwhile, according to today's new data, the total trading volume of 9 Bitcoin spot ETFs was about $2.4 billion yesterday, which is the highest record since the first day of listing, slightly higher than the trading volume on the first day of listing, and about twice the recent daily trading volume.

Among them, the trading volume of the Bitcoin spot ETF IBIT, a subsidiary of the asset management giant BlackRock's iShares, reached an astonishing $1.3 billion, ranking 11th among all ETFs (top 0.3% ranking), and ranking in the top 25 among stocks. Eric Balchunas, an ETF analyst at Bloomberg, wrote on social media: "This is definitely a crazy number for a newly listed ETF."

Starting from January 10th, the Bitcoin held by IBIT, a subsidiary of BlackRock, has been continuously increasing from 228 Bitcoins to the current 126,900 Bitcoins. As the world's largest asset management company, BlackRock manages approximately $8.9 trillion in assets globally. It is one of the most competitive ETF products in terms of customer resources and brand effect. Currently, the Bitcoin ETF holdings of BlackRock and Fidelity Investments have exceeded 190,000, surpassing MicroStrategy's 190,000.

On February 26th, Michael Saylor, the founder of MicroStrategy, announced on his social media platform that MicroStrategy had purchased 3,000 bitcoins from February 15th to 25th at an average price of $51,813. MicroStrategy now holds a total of 193,000 bitcoins with an average holding price of approximately $31,544. Earlier, in an interview, Michael Saylor stated that spot ETFs have opened the door for institutional capital to flow into the Bitcoin ecosystem. ETFs are promoting the digital transformation of capital, with hundreds of millions of dollars flowing into the digital economy from traditional analog ecosystems every day. He believes that "Bitcoin is a strategy to exit the traditional ecosystem."

Michael Saylor believes that the market value of Bitcoin has just exceeded one trillion US dollars and is competing with assets such as gold, real estate, and even the S&P index. The market value of all these assets is much higher than that of Bitcoin. However, he believes that Bitcoin itself is superior to all of the above as an asset, and there is no reason to sell in this situation.

Stablecoin market value continues to rise, halving expectations increase bullish sentiment

The market value of stablecoins continues to rise and is expected to reach $140 billion, which is another indication of the increasing amount of funds in the market.

Other than the increasing demand for funds, the Bitcoin halving is also a catalyst for Bitcoin to reach its next high point.

According to BTC.com, the current block height is about 50 days away from the Bitcoin halving time. Historically, block rewards have brought potential selling pressure to the market, which may lead to all newly mined bitcoins being sold, thereby affecting the price. However, this halving is different from previous ones.

The current 6.25 bitcoins mined per block is equivalent to approximately $14 billion per year (assuming a bitcoin price of $43,000). To maintain the current price, there needs to be corresponding buying pressure of $14 billion per year. After the halving, these demands will also be halved, with each block only mining 3.125 bitcoins, which is equivalent to a reduction to $7 billion per year, effectively reducing selling pressure.

And due to the aforementioned, in a sustained and mature Bitcoin ecosystem, the net inflow remains stable, and ETF liquidity may have a certain offsetting effect on the continuous selling pressure from mining issuance. Sensitivity analysis of daily net inflows ranging from $1 million to $10 million shows that at the higher end, the reduction in selling pressure may reflect another halving effect, fundamentally transforming the market structure of Bitcoin in a positive way.