Bitcoin has had a volatile past 48 hours.
After breaking past $7,800 on Tuesday, the cryptocurrency rocketed higher, entering a steep uptrend that saw no serious pullbacks. Bitcoin was moving so fast that just hours after Blockonomi’s market update yesterday, BTC had slingshot to $8,800. And just hours after that it was past $9,000, reaching a price of $9,500 early this morning.
As fast as Bitcoin rallied, though, it reversed. After failing to break $9,500, the cryptocurrency dove exactly 10% to $8,550 as sellers finally stepped in. But Bitcoin has since recovered a few hundred points to enter a consolidation pattern at $8,800.
This move largely caught traders off guard, with crypto derivatives data site Skew.com reporting that over $40 million worth of BitMEX long positions were liquidated during this drop from the local highs.
Even still, analysts remain bullish, claiming that the technical and fundamental outlook for Bitcoin remain bullish after the drop.
More Upside Is Still in the Cards
In response to the drop, Alex Krüger — an economist and investor closely tracking the crypto markets — explained that “despite the morning crash, the BTC move was very bullish.”
Despite the morning crash, the $BTC move was very bullish. Funding barely increased, aggregated OI didn't increase by much, and Bitmex OI decreased. That speaks of the move driven by spot buyers rather than excessive leverage. The 50% retracement was welcome after +20% in 24H.
— Alex (@classicmacro) April 30, 2020
Krüger cited derivatives market information to back this sentiment, pointing to the low funding rates on futures exchanges, the flat aggregate open interest across Bitcoin futures contract, and the decreasing open interest on BitMEX’s contracts.
This, he explained, is suggestive that Bitcoin’s move was “driven by spot buyers rather than excessive leverage.” Excessive leverage, of course, eventually needs to unwind while spot buyers can hold their coins for as long as they want to, adding credence to the rally.
A trader going by Cantering Clark corroborated, who explained that the fact that BitMEX’s open interest was actually declining throughout this move is indicative of more upside in the cards:
There can still be a big herd rush of momentum when sidelined players catch up. An initial delayed response of participants, even better in very inefficient markets. Open interest not rising on futures gives plenty of room for BTC to run if we see some big hitters start piling on there.
Investors Were Tripping Over Each Other to Buy Bitcoin
Data shows that there was a vast amount of activity in the spot market, just as Krüger suggested.
Although it could be a coincidence, as Bitcoin was rallying $100 seemingly every few minutes yesterday, Coinbase (Coinbase’s retail and professional platforms) temporarily went down in a manner that reminded many of 2017’s rally, when the service constantly crashed and was slow due to an influx of users.
Binance saw a similar trend. While it didn’t go down, the exchange reported over $15 billion worth of total exchange volume over a 24-hour time frame. Much of the volume covered the firm’s Bitcoin and Ethereum trading pairs against Tether’s USDT, suggesting strong buying activity.
This was followed by Bitcoin increasing in popularity across social media channels.
According to Samson Mow, CSO of Blockstream, the Chinese term for “BTC” (比特币) recently exploded in popularity on Weibo. This comes shortly after the Chinese term for “Bitcoin halving” experienced a similar treatment last week, suggestive of a larger hype cycle for cryptocurrency.
— Samson Mow (@Excellion) April 30, 2020
As of April 29th, the search term was the 19th most popular term on the trending page, registering hundreds of thousands of comments on the matter from the over 400 million users that frequent the social platform.
The trend was more global than just China. On an anecdotal level, I experienced an increase in calls and messages from friends and family regarding Bitcoin, including my grandfather (for the second time).