Bitcoin Price Surge: Analysts Unveil the Reasons Behind the Remarkable Growth

On February 27, Bitcoin tested the $57,000 level, marking an impressive surge of over 10% within a single day. The crypto community has been buzzing with speculation and analysis, attempting to unravel the catalysts behind this significant price movement. Incrypted has compiled insights from various experts to shed light on the possible reasons for this uptick in the world's foremost cryptocurrency.

Prelude to the Surge

The day preceding the surge, February 26, 2024, witnessed record-breaking trading volumes in spot Bitcoin ETFs. Concurrently, the outflow of funds from the largest fund, the Grayscale Bitcoin Trust ETF (GBTC), hit a new low of $22.37 million, according to SoSo Value.

Expert Insights

Pavel Savich, head of research at delta.theta and YieldFort, observed that on February 26, Ethereum was trading much better than Bitcoin. However, the narrative changed dramatically with the opening of the American trading session:

"A significant portion of the growth occurred towards the end of the American session. The primary driver was the trading activity in spot Bitcoin ETFs. American liquidity entering the market propels it upwards. There are days when demand is modest, but yesterday's was one of the record highs."

Vladimir Cohen, a trader and asset manager, highlighted that institutional investors from the US continue to influence the market significantly. He noted that the trading volume in spot Bitcoin ETFs quadrupled compared to February 23.

"Moreover, BlackRock set a new record by adding $1.3 billion worth of Bitcoin to its ETF, while outflows from Grayscale dropped to a minimum of about $22.4 million. This marks a very positive start to the week immediately following the Chinese New Year," Cohen told Incrypted.

Many experts echoed this sentiment. Crypto influencer Anthony Pompliano pointed out the high demand for Bitcoin on Wall Street, stating that the supply is insufficient to meet everyone's needs, pushing the price higher. Analyst Budhil Vyas mentioned that the institutional demand is offsetting selling pressure, leading to a swift price rise.

Experts also highlighted the increased activity in the derivatives market as a contributing factor.

"The nearest expiration of options this week is monthly and quite significant, indicating that a large number of traders and short-term investors are buying call options and trading predominantly in a bullish direction. This affects the actions of a major market maker who trades derivatives, further aiding the market's upward movement," explained Pavel Savich.

Cohen observed a partial influx of liquidity into Bitcoin and Ethereum derivatives from the stock market:

"Indeed, the indices are currently at their peaks, and their growth potential is not as significant as that of Bitcoin and Ethereum this year. The growth is also fueled by the dollar index dropping to 103.6 points. Investors have free cash after taking profits in NASDAQ and S&P 500 and are ready for riskier transactions."

He further noted that the dynamics in options on Deribit indicate further growth potential for Bitcoin:

"For March 29, a month before the halving, the volume already amounts to $5.832 billion. This includes $800 million in call options (for buying) at prices of $60,000 and $65,000, and over $600 million in calls ranging from $65,000 to $120,000."

Experts also highlighted events in the Bitcoin and Ethereum ecosystems that they believe will support the cryptocurrency markets in the near future.

In Ethereum's case, structural factors, particularly the Dencun update, are anticipated to provide support. Savich mentioned that the expected hard fork, along with the increase in the number of wallets, active network users, "airdrop season," and the influx of new liquidity into the market, will bolster Ethereum.

For Bitcoin, the upcoming halving and the continuous high influx of liquidity play a significant role.

"If other markets, particularly precious metals, are experiencing outflows, the spot Bitcoin ETF sector is seeing inflows. And this is reflected in the price," Savich noted. Additionally, he mentioned the positive news background from the assessment of future cryptocurrency prospects by major American market players. According to him, the recent purchase of Bitcoin by MicroStrategy for more than $150 million, excluding ETFs, creates "quite a substantial additional demand."

"The interest in the crypto market is growing, and volatility will be high in the next two months," concluded Vladimir Cohen.