What drives Bitcoin's enormous race - doubling in just 26 days?

Without a doubt, 2020 is a turbulent year for Bitcoin, in which the relatively small and immature cryptocurrency market generates some significant turbulence along with most traditional markets.

Despite recent micro fluctuations and recessions, Bitcoin is still the best performing major asset for both 2020 and the past decade. Currently, Bitcoin is facing global adversity that helps to promote the story of a safe haven.

Bitcoin witnessed Strong micro and macro performance compared to global market

After Bitcoin and the stock market slumped in mid-March, bulls stood up and fought back, pushing both BTC and the stock market higher.

Bitcoin rebounded particularly strongly, nearly doubling from the regional low of over $ 3,000. Therefore, the current price is slightly higher than the opening price in 2020.

Of all the major markets, Bitcoin is one of the best performing markets by 2020. The Dow Jones and all other benchmark indices are still trading 20% ​​or more since the beginning of the year. 2020.

BTC is also the strongest asset in terms of macro performance, as comparing the logarithmic chart of the cryptocurrency with the S&P 500 and the real estate market shows its true strength.


Increasing the value of Bitcoin and other assets | Source: Willy Woo

The safe shelter story reappears after being lapsed for a short time

Although the recent uptrend of Bitcoin has emerged when the stock market has some signs of stability, it is important to note that it seems that its link to the global economy will soon suffer. break.

According to the data From the Skew analysis platform, Bitcoin's correlation with the S&P 500 has dropped significantly compared to March.


The real correlation between Bitcoin and S&P500 | Source: Skew

Since then, the safe-haven story was once again heightened after many analysts believed it was disabled last month. Renowned analyst for on-chain data Willy Woo believes that BTC is demonstrating safe-haven characteristics.

“Is BTC showing a safe haven asset feature? Right. I think this is partly due to Bitcoin's production costs creating floor prices and partly because of the price increase thanks to the S-curve of acceptance rates (the acceptance level of other assets is in a state of storm. tie). "

Thus, Bitcoin has doubled in the past 26 days. So what is the main cause? The following analysis identifies three important factors driving prices.

The order to buy Bitcoin in the spot market increased

Coinbase, Kraken, Binance, Bitfinex and other spot exchanges have a spike in buying volume after the March 13 plunge, causing BTC to drop from $ 8,000 to $ 3,600 within 24 hours.

At the same time, OI (the total number of long and short contracts opened at a given time) dropped sharply on major futures exchanges including BitMEX, Binance Futures and OKEx.


Total OI of Bitcoin futures | Source: Coinbase, Skew

The sharp decline of OI on futures exchanges and the apparent increase in buying volume in the spot market essentially leads to a change in the market: the spot market begins to control. Bitcoin price trend, instead of futures market.

The futures market is often volatile for the price of Bitcoin because traders use leverage (borrowed capital) to trade, while in the spot market, investors are selling and buying Bitcoin without a loan.

The change has stabilized the market, allowing the price of Bitcoin to recover without a severe pullback and with relatively low volatility.

BTC never dropped below $ 4,000 from the start

On March 31, Coinbase released a blog post detailing market trends after Bitcoin collapsed to just $ 3,600.

The exchange said that most users on the platform bought Bitcoin after the price plummeted, causing the liquidation to decline much lower on future exchanges than the spot trading platform.

Coinbase explain:

“The largest liquidation on BitMEX, which provides highly leveraged products. In the context of a sell-off, Bitcoin on BitMEX trades lower than other exchanges. Until BitMEX was shut down for maintenance at the highest level of volatility (citing the reason for the DDoS attack), liquidation was halted and the price quickly increased again. When the situation subsided, Bitcoin soared from below $ 4,000 and traded between $ 5,000. ”

This opens the theory that Bitcoin should never have dropped to levels in the $ 3,000 area in the first place and explained the rapid V-rise recovery to $ 7,350.

Quickly recover to critical support levels

Since the beginning of 2018, $ 5,800 has been acting as an important support area. It prevents prices from falling to the $ 3,000 to $ 4,000 area except for December 2018.

Bitcoin price has recovered from the area between 3,000 to 5,800 quickly, within just 7 days. The level of 5,800 was very active after being tested three times in March, prompting Bitcoin to extend its rise.

Some high-end traders said that after reaching $ 7,300, the resistance of $ 7,700 will likely be the next area that Bitcoin needs to deal with in the near term.

“I have long BTC because I think the peak has not yet formed. Will manage cautiously, the $ 7,660 area is reasonable.

My judgment may be wrong if the context changes. Do not learn blindly, it may be a loss. This is not investment advice ”.

You can see the price of BTC here.

Disclaimer: This is not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

Minh Anh

According to AZCoin News

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