Bitcoin is showing significant growth since the last quarter of 2023, with its price rising from around $25,000 to reaching $64,000 at its higher price in January 2022 before the Bitcoin Halving.
This price movement has triggered many investors to call the crypto market to have its early bull phase, with institutional investors and retail investors collaborating, pushing Bitcoin’s price higher.
Even though the price is going up, there are some questions that are going around, which are why is the Bitcoin Price Rising, and is the market still looking good?
Institutional Investors and Retail Investor Collaborating
The rise of Bitcoin price happened because of the influx volume that the Bitcoin Spot ETF gave through its issuers purchasing Bitcoins in the billions of dollars.
It is recorded that the Bitcoin buying volume itself has reached an average of $200 Million to $600 Million daily, which mostly came from institutional investors buying the ETF.
When an institutional investor buys a Bitcoin Spot ETF share, the issuers need to match that order in Bitcoin, hence why Bitcoin is seeing a large amount of buying volume.
The daily transaction volume itself, including buying and selling volume, reached $7 Billion yesterday, which is a new record since its highest volume during the launch.
Most of these volumes are signs that institutional investors are interested in Bitcoin which has led investors to believe that adoption rate is growing fast.
The transaction volume of institutional investors has also been in line with the transaction volume from retail investors and traders.
This creates a narrative that Bitcoin’s institutional and retail investors are collaborating, pushing the market higher.
Looking at the chart above, from Coinglass, it can be seen that traders are also trying to match the volume of spot transactions.
In the futures market alone, the open interest, or the volume that represents how much money is being traded in the Bitcoin futures contract, has reached more than $60,000 excluding the amount of leverages that are being used.
But looking at both graphs above, it can be seen that even though volume has been increasing, the spot and derivative market shows a weakening sign in the last two days, giving hints of a potential price correction in Bitcoin.
Greed is Higher
Also another thing to look at is the Fear and Greed Index which is an index describing the conditions around investors in the crypto market, especially Bitcoin.
When the index reaches extreme greed, usually it is a sign of potential correction ahead because of the market being overheated.
Conversely, when the index reaches extreme fear, it is a sign of potential price gain because the selling pressure has started to fade out and the price is considered cheap for investors to go in.
Looking at the current condition of the index, it can be seen that Bitcoin is standing around Greed condition, which is a potential sign of a correction ahead.
Even though it has not reached extreme greed yet, it is good to be careful when Bitcoin is nearing the 100 value of the index, because usually volatility might be right around the corner.
As Bitcoin’s price usually never goes higher than the previous highs of the bull market before halvings occurred, it is good to keep in mind that Bitcoin’s price is nearing the potential current top and might not go higher in the short term.
So to prepare for the long term, investors and trader need to set their psychological state to not get FOMO’ed into buying or trading Bitcoin especially with too high of a leverage, so that the capital be utilize for the long run.
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