Bitcoin and Ether surged amid broader cryptocurrency rally
Bitcoin was last up 1.6% at $39.065.00, according to Coin Metrics and that's good news for traders. Earlier in the day, the cryptocurrency had jumped 11% over the past 24 hours, after dropping to $3,438.57 on Thursday. Ether rose 2.1 percent to $2709.22, which is an indication that the market is rising again.
The heavy selling erupted on Thursday due to the Russian invasion of Ukraine, which also saw a sharp decline in global stocks of large companies, especially energy companies.
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For several months, bitcoin was correlated with other risk assets such as stocks, as more institutional investors got involved and short-term investors trading bitcoin like other risky stocks entered the market and this is one of the reasons for bitcoin's rally.
The sharp decline was a reminder that “in a crisis, all correlations go to 1,” Noel Acheson, head of market insights, adding that it boosted the characteristics of risk-assets in bitcoin and other different currencies.
Meanwhile, the recovery shows that long-term investors have been "waiting on the wings to buy the bank dip" and risk-takers and investors are now betting that things "Bitcoin and the cryptocurrency market will never be as bad as it initially seemed,” she said, and this is what happened. Send Bitcoin to a recovery.
“In the cryptocurrency market, we've known for some time that there is a big move and recovery coming in the cryptocurrency market - this usually happens after periods of consolidation and activity in the options market has been indicating this as well - but we didn't know in which direction," Atchison said. "Now we all know: both, and this is beautiful and joyful news. ”
Acheson said the 60-day relationship between bitcoin and the S&P 500 hit an all-time high on Wednesday due to milkers in Ukraine.
She added: “The correlation was more than 0.5 in two other events, and each time the price went back to the lower and lower levels, but this time it was not.
read more: Will Bitcoin price increase to $50,000 in March amid Russia-Ukraine war?
We are likely to see the same thing again, as risk-averse investors and traders abandon the price-setting floor for long-term investors who see bitcoin as an insurance asset in times of geopolitical uncertainty, currency turmoil, and massive, massive inflation.
What we don't know about the cryptocurrency market is when this will happen. Anytime and anywhere."
The astonishing intraday reversal in US stocks, some European and international stocks on Thursday and throughout the trading session on Friday led the major indices to close higher.
This positive price action has filtered down to cryptocurrencies such as Bitcoin, Ethereum, and others.
big short squeeze
The bounce of cryptocurrencies such as Bitcoin and Ethereum is also in large part the result of so-called short squeeze.
About 73% of bitcoin futures traders, investors and companies have held short positions, according to data from Glassnode.
Since then, there have been more than $180 million in market liquidations, and sentiment has turned to the upside, Valkyrie Funds CEO Leah Wald said. The options are set to expire on Friday which is rather good.
“Given the situation in Ukraine, market participants generally sold Bitcoin to protect downside risks and a crash in the cryptocurrency market,” said Vijay Ayar, vice president of corporate development and international affairs at crypto exchange Luno. “What we are seeing now is the market unwinding and the closing of short positions and that is bad.”
When investors are short selling, they are essentially betting on a drop in the price of the cryptocurrency or a crash in the cryptocurrency market. Traders can sell bitcoin by buying a futures contract that is betting on a lower price of the cryptocurrency compared to where it is being traded when buying that contract or reason. They usually have an expiration date and a specific time to sell them.
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A trader who is betting that the price of Bitcoin will go down will sell a contract in the hope that it will go down so that they can buy it at a lower price and profit the difference when the market goes up again. If the contract price goes up and the trader closes his position, he has to buy back that contract at a higher price and here he will lose.
This can cause the price of Bitcoin to rise and subsequently the price of altcoins to rise, resulting in a short squeeze.
“This momentum seems to have a lot of benefits for the market and should continue at least through the weekend or a month for the market to recover again, barring more dramatic bad news in Ukraine or some other black swan eventit will revive the cryptocurrency market,” Wald said.
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