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What’s behind the Bitcoin pump? 3 key factors, explained

Bitcoin touched $35K last night, marking a new yearly high. BlackRock, Grayscale and short liquidations all play a part in the surge.

It’s been a good week for Bitcoin, the world’s largest and first cryptocurrency.

On October 24, the legacy crypto surged past key resistance levels and touched $35,066, CoinGecko data shows.

The jump marks a 20% 7-day gain, and a 17-month high, spurring on hopes of a fresh bull run.

Bitcoin price on October 24. CoinGecko.

Crypto markets are volatile and unpredictable, and they can be driven by a range of unforeseen, extraneous factors – from software bugs to government policy. There are however a few factors that clearly correlate with the price of Bitcoin.

#1 BlackRock’s spot Bitcoin ETF approval looks more likely

Rumours began swirling last night that the US Securities and Exchange Commission (SEC) is looking toward approving BlackRock’s hotly-anticipated spot Bitcoin ETF.

This rumour was bolstered by the input of Eric Balchunas, a senior ETF analyst and Bloomberg, who tweeted that the iShares Bitcoin Trust (BlackRock’s ETF) has been listed on the Depository Trust & Clearing Corporation, which clears NASDAQ trades.

“And the ticker will be $IBTC. Again all part of the process of bringing ETF to market,” he wrote.

In a similar vein, David Polk finance lawyer Scott Johnsson, wrote, “So two things caught my eye from the latest iShares (Blackrock) S-1 amendment: They’ve obtained a CUSIP in preparation for a launch. They may be looking to seed with cash this month.”

The prospect of a spot Bitcoin ETF landing on key exchanges such as NASDAQ and CBOE has had the market in its teeth for the better half of 2023.

When BlackRock first revealed its application, Bitcoin saw strong bullish price action, surging past the psychological mark of $30,000.

Approval would signal a huge shift toward the institutional adoption of Bitcoin, leading to improved regulation, reduced volatility and overall positive sentiment.

#2 Short liquidations are up

Short liquidations may have contributed to the price acceleration of BTC, data shows.

24 hours before Bitcoin eyed $31K yesterday, a key resistance level, there were $114.43M liquidations – $84.93M of which were short positions.

$22.33M of these shorts were Bitcoin liquidations.

Short selling is a trading strategy whereby investors borrow and sell an asset (like Bitcoin) expecting the price to drop. The aim is to buy the asset back later at a lower price, pocketing the difference.

If the price rises rather than falls however, short sellers are forced to buy the asset back in order to cover their positions. This tends to drive buying pressure, pushing the price higher.

#3 The SEC must review Grayscale’s ETF application

Yesterday, the US Court of Appeals issued a new ruling concerning the review of Grayscale’s application for a spot Bitcoin ETF.

Grayscale initially applied to convert its flagship Bitcoin product, GBTC, into a spot Bitcoin ETF, but the SEC rejected it.

In August, the Court of Appeals overturned the SEC’s decision in favour of Grayscale, describing their action as “arbitrary and capricious”. Following the news, Bitcoin surged 7% in 24 hours.

The updated Court ruling affirms that the SEC must now decide whether to approve to reject Grayscale’s spot Bitcoin ETF application. While it can still opt to reject, it cannot do so on the same grounds as its previous rejection (i.e. that the futures Bitcoin market is not sufficiently linked to the spot market).

This has spurred on positive sentiment within the market. Converting GBTC into a Bitcoin ETF will give investors direct exposure to Bitcoin in a way that is more convenient, potentially attracting a new demographic of traditional investors into Web3.

What’s next for Bitcoin?

If Bitcoin maintains its current upward trajectory, the next resistance level to watch out for is $36,000.

Some however are convinced that the crypto will soon move to the downside, revisiting $20,000.

Looking further into the future, the 2024 Bitcoin halving is likely to significantly boost the price of Bitcoin.

Standard Chartered for instance believes that the crypto could soar as high as $120,000 following the halving in April next year.

Disclaimer: CryptoPlug does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.

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