Bitcoin experienced a crazy night on Wednesday, rising from $57,000 to $64,000 during the session. However, at 12:30 p.m. Eastern Time, Bitcoin crashed and fell by $5,000 in a few minutes. Futures trading volume rose sharply at the price peak, as did cryptocurrency-related stocks.
Bitcoin futures trading volume surges
Coinbase's "Zero Dollar Account Shock"
Bitcoin's trading volume surged to more than $79 billion in the past 24 hours, up nearly 60%, according to CoinMarketCap.com.
As expected, due to the surge in trading volume, Coinbase, the largest digital asset exchange in the United States, went down again last night. Some users were surprised to see that their account balances on Coinbase were $0.00. As a result, Bitcoin's gains were partially suppressed. Bitcoin's rapid intraday plunge also coincided with the time of the outage report.
However, Coinbase quickly explained: "We are aware that some users may see zero balances in their Coinbase accounts and may experience errors when buying or selling. Our team is investigating this issue and will provide an update soon. Your assets are safe." It later added that trading activity has begun to return to normal.
The shocking numbers behind the crazy market
The total cryptocurrency market capitalization has increased by 2.85% to $2.19 trillion in the past 24 hours. Ethereum has also been strong recently, breaking through $3,300 for the first time since April 2022. Ethereum now has a larger market cap than ExxonMobil, and Bitcoin has also surpassed Meta.
In addition, in the past few days, Bitcoin has hit all-time highs against currencies such as the Japanese yen, Malaysian ringgit, Indian rupee, Taiwanese won, Chilean peso, Australian dollar, South African rand, Norwegian krone and Turkish lira. "It's pretty crazy," said Ryan Kim, head of derivatives at FalconX, a digital asset prime broker.
Bitcoin has risen about 40% this year. At the heart of the move toward record highs is a simple principle of economics: supply and demand. Bitcoin spot ETFs have attracted more than $6 billion since their launch. The surge in demand for cryptocurrencies caused by new ETFs far exceeds the amount of bitcoin long-term holders are willing to sell.
That’s what’s ignited the cryptocurrency market, fueled by traders chasing upward momentum, covering short positions and doubling down on leveraged bets to continue the bullish run. Crypto short positions have been liquidated for $275 million in the past three days.
“We’re starting to see a pretty clear FOMO-type rally,” said Zaheer Ebtikar, founder of crypto fund Split Capital. “More and more people are being convinced to buy.” It all culminated in the cryptocurrency market on Wednesday.
According to a report published by on-chain data analysis company CryptoQuant on Feb. 14, an estimated 75% of new Bitcoin investment comes from Bitcoin spot ETFs in the United States. Nine new Bitcoin ETFs saw a total trading volume of more than $2 billion for the second consecutive day on Feb. 28. According to Balchunas’ X post, BlackRock’s iShares Bitcoin ETF (IBIT) reached more than 100,000 individual transactions on Feb. 27, a significant increase from the average daily volume of 30,000 to 60,000 transactions.
According to Mikkel Morch, founder of digital asset investment fund ARK36, MicroStrategy's recent purchases are mainly driving the rally, which is equivalent to institutional recognition. He said that this rebound is not just a number on the chart, it is a declaration of confidence from institutional investors in the transformative potential of cryptocurrency.
Market outlook
Bitcoin has outperformed traditional assets such as stocks and gold so far in 2024. Bitcoin has been rising even as investors have reduced expectations for monetary policy easing this year, as evidenced by rising U.S. Treasury yields.
"The reversal is all the more impressive given that central banks have indicated they intend to keep rates higher for longer, undermining the theory that the next crypto bull run will be driven by lower interest rates," said Michael Safai, co-founder of quantitative trading firm Dexterity Capital.
CoinTelegraph reported that Bitcoin’s price performance has been largely attributed to market anticipation for the upcoming halving event, which, according to Bryan Legend, investor and CEO of Hectic Labs, has historically led to increased buying activity.
The massive influx of money into bitcoin ETFs has prompted some industry observers to warn of a supply squeeze as miners keep up with demand for new coins. Some analysts say the fact that about 80% of bitcoin’s supply has not been in circulation in the past six months could exacerbate the squeeze and add upward pressure on prices.
Nine new spot ETFs now hold more than 300,000 bitcoins, seven times the number of new coins mined since Jan. 11. After the halving, expected in late April, the number of new coins mined each day will drop from the current 900 to 450. If that demand holds and the supply of new coins is cut in half, supporters predict there is room for prices to rise.
But it is worth noting that the last time Bitcoin traded above $60,000 was on November 12, 2021, after which the price of Bitcoin began to reverse, falling more than 67% to a low of $19,297 in early April 2022. Currently, the cryptocurrency funding rate (an indicator of short demand) is rising wildly.
According to a cryptocurrency analyst under the pseudonym Rekt Capital, the price of Bitcoin could still see a "pre-halving retracement." The pseudonymous analyst added that the market has not yet priced in the upcoming Bitcoin halving based on historical market data. Rekt Capital shared this view in a Feb. 28 article, saying that major Bitcoin fluctuations usually occur after the halving, not before.
Some observers warn that the speed at which Bitcoin has risen leaves investors vulnerable to the boom and bust cycles that have come to symbolize the cryptocurrency.
Jaime Baeza, founder of crypto hedge fund AnB Investments, said: “Volatility has been very high, and as the derivatives basis and funding rates suggest, leverage is very high right now, so I would not be surprised to see a big price correction, perhaps 20% or more. That said, I would not be shorting while prices continue to rise at this pace.”
The article is forwarded from: Jinshi Data
