As a seasoned crypto investor with a decade of market experience under my belt, I must say that this recent Bitcoin rally has been quite the rollercoaster ride. After bracing for impact during Monday’s plunge to $49,000, I was pleasantly surprised to see BTC soaring as high as $62,700 today.
In recent days, Bitcoin‘s price has experienced a significant increase. After hitting a low of $49,000 on Monday, the value of Bitcoin spiked up to as much as $62,700 during today’s Asian trading session, marking a 24% surge from its Monday low. In just the last 24 hours, Bitcoin has climbed by 7%. Here are the main factors contributing to this trend.
#1 Fading US Recession Fears Fuel Bitcoin Rally
Economic factors are primarily responsible for the recent price fluctuations, as both stocks and Bitcoin have risen. It’s worth noting that the U.S. jobless rate climbed to 4.3% in July, marking a four-month high. This increase has sparked worries about an approaching recession, according to the Sahm Rule. This economic marker suggests that a potential recession may be imminent if the average unemployment rate over the past three months increases by 0.50 percentage points or more compared to its lowest point in the preceding year.
The unexpectedly low jobs report earlier added fuel to the initial anxiety, as only 114,000 new jobs were created instead of the projected 175,000. However, the situation changed drastically yesterday following the release of jobless claims data. A remarkable decrease of 17,000, bringing the total to 233,000, represented the largest drop in nearly a year, calming anxious markets.
Mohamed A. El-Erian, President of Queens College Cambridge and economic advisor at Allianz, conveyed via X that global financial markets responded to the data release and viewed it as a breath of fresh air following last week’s concerns about unemployment and growth. Yet, he cautioned that this rapid data series can be quite noisy.
As someone who has experienced periods of unemployment myself, I can tell you that any decrease in jobless claims is a cause for relief. Last week, the unexpected surge in unemployment and economic slowdown was concerning, but this week’s drop to 233,000 claims is certainly a step in the right direction. However, as someone who has been on both sides of the employment spectrum, I know that we need to closely examine the details of this data release to fully understand its implications. We must consider the breadth and distribution of these jobless claims to get a more accurate picture of the labor market’s health. Only then can we make informed decisions about economic policy and job creation strategies.
— Mohamed A. El-Erian (@elerianm) August 8, 2024
As a crypto investor, I’ve been reflecting on Alex Krüger’s insights about the recent market turbulence. The crash instigated by last week’s unemployment and payrolls data appears to have run its course, thanks to today’s jobless claims data. The price movements and new jobs data seem to validate my suspicions that the broader equities market underwent a crypto-like margin call, primarily fueled by positioning, narrative, and widespread panic rather than fundamental factors.
Krüger also advised against relying too heavily on individual data: “The Federal Reserve avoids making decisions based on single data points because they can be unreliable. The payrolls data, in particular, can be quite volatile. However, last Friday, the market reacted wildly, suggesting a potential policy error and urgent interest rate reductions based on one such data point.”
#2 Short Liquidations Amplify BTC Surge
1. The fluctuation in Bitcoin’s price led to a large number of forced trades (short liquidations), with approximately 52,413 traders experiencing this in just the last 24 hours. This resulted in total crypto liquidations worth $222.02 million, as reported by Coinglass. Notably, around $90 million in short positions for Bitcoin were liquidated during this period, making it the third-biggest such event over the past five months.
Julio Moreno, the Head of Research at CryptoQuant, explained how this recent surge in Bitcoin price is primarily due to traders closing their short positions in the futures market: “The rise in Bitcoin is largely because of traders closing their short positions in the futures market. The open interest has decreased while prices have increased.”
#3 MicroStrategy Buying?
As Bitcoin’s price increased significantly, there was a significant increase in interest from the immediate market. Crypto expert Kiarash Hossainpour hypothesized, “Get ready for this: I can picture this wild late-night market purchase originating none other than Saylor. After all, he just declared another $2 billion investment not long ago. Who else makes purchases during the illiquid hours after the US market closes on a Thursday night? That’s right, no one.”
As a researcher, I’m sharing the recent announcement made by MicroStrategy. Led by Michael Saylor, the company has unveiled plans to substantially boost its Bitcoin holdings. To finance this expansion, they are planning to raise approximately $2 billion through a new at-the-market equity offering. This was disclosed in their Q2 2024 earnings report. In their own words, MicroStrategy explained: “We remain vigilant in managing our equity capital and have filed a registration statement for a new $2 billion at-the-market equity offering program.”
At press time, BTC traded at $61,186.
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2024-08-09 14:11