3 reasons why Bitcoin price doubled in less than a month

The price of Bitcoin (BTC) has doubled in less than a month - rising from $ 3,600 to over 7,350 USD. While traders believe that this explosion of Bitcoin is due to many resonant factors, there are three main factors contributing to them.

These three factors are a significant increase in spot trading, a massively excessive fall below $ 4,000, and a rapid recovery of BTC to key support levels.

Factor # 1: The buying power of Bitcoin in the spot market increases sharply

Coinbase, Kraken, Binance, Bitfinex and other spot exchanges have witnessed a spike in buying volume after the fierce crash on March 13, which caused the price of BTC to drop from $ 8,000 to $ 3,600 in within 24 hours.

At the same time, open interest - a term used to describe the total number of Long and Short contracts opened at a given time, has dropped sharply on major futures exchanges including BitMEX, Binance Futures and OKEx.

Total number of future Bitcoin open contracts. Source: Coinbase, Skew
Total number of open Bitcoin futures contracts. Source: Coinbase, Skew

The sharp decline in the number of open interest on future trading platforms and the increase in spot buying volume have fundamentally changed the market. The spot trading market has started to control the price trend of Bitcoin, instead of the futures market.

The futures market often causes strong volatility for Bitcoin prices because traders use leverage (borrowed from the exchange) to trade cryptocurrencies, while in the spot market, investors sell and buy Bitcoin. without a loan.

This change has stabilized the market, allowing Bitcoin price to recover without serious obstacles and with relatively low volatility.

Factor # 2: BTC drops quickly below $ 4,000

On March 31, Coinbase released a detailed report on the blog, which revealed the market trend after Bitcoin collapsed to $ 3,600.

Leading U.S. cryptocurrency exchange said the majority of its users have bought into Bitcoin after this unexpected incident, in addition to a liquidation that caused BTC to drop much lower on futures exchanges. with spot exchanges.

Coinbase explains:

“Floor-based liquidation is a highlight on BitMEX, which provides high leveraged products. In the midst of a massive sell-off, Bitcoin prices were trading lower than other exchanges. It was only when BitMEX was shut down for maintenance at the highest level of volatility (the reason attributed to a DDoS attack) that the liquidation was halted, and the price quickly increased again. When things were more stable, Bitcoin soared shortly after $ 4,000 and traded between $ 5,000. ”

This suggests a theory that Bitcoin should never have dropped below $ 4,000 in the first place, which explains the rapid V-shaped rebound to $ 7,350.

Factor # 3: Quick recovery to critical support levels

Since the beginning of 2018, the $ 5,800 level has been acting as an important support area in history. It keeps the BTC price from falling to $ 3,000 to $ 4,000, except for December 2018.

Bitcoin price has recovered from the region between $ 3,000 to $ 5,800 at a rapid pace within seven days. The $ 5,800 level acts as a strong bottom after being tested three times in March, allowing Bitcoin to perform a sustained rally.

Some senior traders have said that after breaking out of the $ 7,300 range, the resistance of $ 7,700 could be the next area that Bitcoin will approach in the near future.

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According to CoinTelegraph
Translated by ToiYeuBitcoin