The Bitcoin price has recently exceeded $35,000, a level not seen since early May 2022. This surge is attributed to several factors beyond mere speculation, with the five most significant reasons being:
#1 BlackRock’s Spot Bitcoin ETF Approval Looms Large
The main catalyst for this surge appears to be the growing anticipation surrounding the potential approval of a Spot Bitcoin ETF, particularly one from BlackRock. Scott Johnsson, a respected finance lawyer from Davis Polk, noted that two key developments in an iShares (Blackrock) S-1 amendment caught his attention: the acquisition of a CUSIP in preparation for a launch and the possibility of seeding with cash this month.
This sentiment was further reinforced by an image circulating on X, highlighting the listing of the BlackRock iShares Bitcoin Trust on the Depository Trust & Clearing Corporation (DTCC) with the ticker IBTC. Adding credibility to these rumors, Bloomberg’s Eric Balchunas commented, “The iShares Bitcoin Trust has been listed on the DTCC. And the ticker will be $IBTC. Again all part of the process of bringing an ETF to market.”
However, James Seyffart from Bloomberg offered a note of caution, stating, “There is no set time. Could literally be days, or months, or years theoretically.”
#2 Grayscale’s ETF Dispute Reaches A Conclusion
Yesterday marked a significant turning point in the ongoing dispute between Grayscale and the U.S. Securities and Exchange Commission (SEC). The DC Circuit Court of Appeals concluded the court case, compelling the SEC to reevaluate its previous decision to reject Grayscale’s proposal to transform its Grayscale Bitcoin Trust (GBTC) into a spot ETF.
This court decision supports its initial judgment from two months ago, where it criticized the SEC’s denial as being “arbitrary and capricious.” The SEC chose not to challenge this ruling, making the latest action by the court a procedural step.
The responsibility now lies with the SEC, which must decide whether to approve Grayscale’s application or reject it based on different reasons. While this development is procedural, it adds weight to the belief that the SEC might soon approve a spot ETF.
#3 Bitcoin Short Sellers Are Squeezed
A significant portion of the market found themselves in an unexpected situation. Those who bet against the market got hit hard. According to Coinglass data, a staggering $161 million worth of BTC futures shorts were forcefully closed just yesterday, and an additional $35 million today. Highlighting this development, Julio Moreno, the head of research at CryptoQuant, drew attention to the trend.
The increase in Bitcoin’s price has been mainly driven by short sellers being forced to buy back their positions. As the price climbed above $31,000, there was a significant decrease in Open Interest. It’s interesting to witness a rally that doesn’t primarily originate from a widespread bet on rising prices.
Supporting this perspective, Joe Consorti, a market analyst at The Bitcoin Layer, noted, “As Bitcoin surged to $31,000, there was a noticeable increase in futures positions, similar to the rally we witnessed from $25,000 to $30,000 in late June. Rises in price driven by leverage can be risky, much like structures built on unstable ground.”
#4 Emergence Of TWAP Buying And Coinbase Premium
In a thought-provoking analysis that has captured the interest of the crypto community, Skew, a highly respected analyst, pointed out a fascinating trend in Bitcoin’s trading. They noted, “There’s a noticeable TWAP buyer that has been active since Bitcoin hit around $30.6K. The impact of this TWAP buying on the price trajectory seems more pronounced this time around,” Skew observed.
Delving deeper into the numbers, they added, “If we estimate, it seems to be about 500,000 transactions roughly every hour, amounting to about $6 million. Over five such instances, this would add up to $30 million.”
For those not familiar, TWAP, or “Time Weighted Average Price,” is an algorithmic trading strategy. Its aim is to execute orders over a specific period, ensuring that the average price during that time is achieved. This approach is particularly useful for large orders, helping to minimize any abrupt price swings in the market. Essentially, it suggests a significant player, possibly an institutional investor, making substantial acquisitions of Bitcoin.
Skew also brought up the influence of Coinbase: “BTC Coinbase Spot: With such intense TWAP buying, there must be significant liquidity to accommodate such a buyer. Currently, it seems that market makers are the ones selling to this buyer. If we take a look at the order book, there seems to be a slight imbalance towards more asking liquidity around the $37,000 mark.”
This observation resonates with the observations of CryptoQuant CEO Ki Young Ju, who noted the abrupt surge in the BTC Coinbase premium, stating, “BTC Coinbase premium just skyrocketed.”
#5 Max Pain For Gamma Shorts In The Options Market
The often complex landscape of the options market has also played a significant role in shaping Bitcoin’s price fluctuations. Alex Thorn, head of firmwide research at Galaxy, drew attention to the phenomenon, saying, “We are approaching maximum pain for gamma shorts.”
Yesterday, NewsBTC reported an important insight: the way options market makers were positioning themselves in Bitcoin had the potential to increase the intensity of any upward price trajectory for Bitcoin in the short term. Alex Thorn elaborated on this, “Options market makers are increasingly shorting gamma in Bitcoin as the BTC spot price rises. […] This should increase the explosiveness of any short-term upside move in the near term.
Further highlighting this trend, Thorne pointed to data from Amber and explained, “At $32.5k, market makers are required to buy a delta of $20 million for each subsequent 1% move higher.” Thorne’s analysis seems accurate.
At press time, BTC traded at $34,029.
