Bitcoin's value briefly surpassed the $35,000 mark, marking its highest point since May 2022, driven by optimistic feelings surrounding a potential bitcoin exchange-traded fund (ETF) and a rush for security resulting in a surge of short liquidations.
Bitcoin experienced a 7.97% increase, hitting $33,900.00 on Tuesday, as per Coin Metrics. It peaked at $35,113.29 late Monday night, a level unseen since May 8, 2022. Since the beginning of the year, Bitcoin's value has soared by 104%, and it has witnessed a 105% increase from its lowest point in 2022.
This upswing might be partially attributed to investors rushing to close out their short positions on the cryptocurrency, leading to a short squeeze. On Sunday, Bitcoin underwent $275.45 million in short liquidations, and an additional $100.44 million on Monday, as reported by CoinGlass, a cryptocurrency data provider.
Ryan Rasmussen, an analyst at Bitwise Asset Management, shared with CNBC, “The actual driving force behind Monday’s significant surge, pushing Bitcoin above the $34,000 mark, was the $167 million in short liquidations, predominantly on international exchanges. The extent of the price movement we are witnessing was unexpected, and investors who placed short bets on Bitcoin when it was trading above $33,000 are undoubtedly experiencing the brunt of this unforeseen rally.”
Bitcoin’s upward movement, its first 10% increase since March 14, also elevated the broader cryptocurrency market. Ether, XRP from Ripple, and Solana's token each rose by about 4%, while the Solana token increased by 2%. Cryptocurrency stocks also gained momentum; Coinbase and Microstrategy saw increases of 6.3% and 12.6%, respectively. At one point during the day, Coinbase’s stock increased by double digits, along with major mining stocks. Marathon Digital closed the day with an 11.5% increase, while Riot Platforms saw a 10.3% gain.
Last week’s decision by the SEC to not challenge a crucial court ruling in Grayscale's lawsuit by the required deadline has fueled speculation that a bitcoin-related ETF could receive approval in the coming months. Momentum has been building as entities involved in the bitcoin ETF pursuit have updated their filings, and influential investors such as Cathie Wood from Ark and Mike Novogratz from Galaxy have highlighted a positive shift in the SEC's stance, noting the agency’s constructive engagement with the sector.
A bitcoin ETF would offer investors an avenue to participate in the price movements of Bitcoin without directly owning the cryptocurrency, known for its high volatility.
Major financial players including BlackRock, Invesco, Fidelity, and Grayscale have been advocating for bitcoin ETFs, submitting applications to offer these assets as safer investment alternatives compared to the direct, and often speculative, cryptocurrency investments.
Coinbase expressed confidence to CNBC this week that a bitcoin ETF will secure approval from the U.S. SEC.
Bitcoin has shown resilience with a swift recovery in the first quarter following a tumultuous 2022, which saw the cryptocurrency industry entangled in scandals and intense situations. The FTX bankruptcy and charges against Terraform and its CEO Do Kwon in February for defrauding investors from 2018 to May 2022 were among the significant events of the period.
The collapse of TerraUSD (UST), Terraform’s controversial stablecoin, in May triggered a ripple effect throughout the year in the already struggling crypto market, grappling with increasing interest rates.
Bitcoin still remains about 50% below its all-time high from November 2021.