Bitcoin’s Price Surge and Short Squeeze
The recent surge in Bitcoin’s price has sparked speculation that the long-awaited bull market has finally arrived. As the price rallied by 16.1% between October 22 and October 24, bearish traders using futures contracts found themselves liquidated to the tune of $230 million. Interestingly, Bitcoin’s open interest, which reflects the total number of futures contracts in play, increased during this rally.
This differs from a previous drop in August, where long liquidations occurred despite a lower percentage-size price move. This suggests that market makers had their stop losses “chased” during the recent rally.
Changpeng Zhao and BNB’s Role in Bitcoin’s Price Action
A theory suggests that Changpeng “CZ” Zhao, the CEO of Binance, used BNB as collateral for margin on Venus Protocol, a DeFi application. It is believed that CZ sold Bitcoin to support the price of BNB token and then bought back Bitcoin using BNB to “rebalance” the position.
If this theory is true, it would imply significant control over BNB and potentially create a large long position using leverage on Bitcoin futures.
Bitcoin Derivatives Indicate a Healthy Bull Run
Bitcoin derivatives metrics provide insight into professional traders’ positions after the surprise rally. The Bitcoin futures premium reached its highest level in over a year, indicating increased demand for leveraged long positions. Additionally, the options market shows a balanced demand between call and put options, suggesting cautious optimism among traders.
Hot Take: Positive Signs for Bitcoin’s Rally
The recent surge in Bitcoin’s price and the accompanying indicators suggest positive signs for its rally. Despite speculations about a spot Bitcoin ETF approval, there is evidence of a healthy influx of funds, justifying a rally beyond the $35,000 mark. The market dynamics and sentiment are aligning for further gains in Bitcoin’s price.
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