The Bitcoin Rally Is Far From Over: 2 Key Factors Behind The Momentum

Bitcoin has been the buzz of the town lately as it continues to push past key price levels, leaving many to wonder how high it can go. Current technicals and fundamentals indicate that the latest rally has solid foundations, and there are good reasons to think there’s more upside ahead for the leading cryptocurrency.

The latest rally has been fueled by different on-chain sentiments ranging from whale accumulation to the increase in Bitcoin whales. Two of the most important market factors fueling this rally are spot Bitcoin exchange-traded funds (ETFs) and the increase in CME margins, according to analysts at QCP Capital, a crypto asset trading firm.

Most of Bitcoin’s price action since October 2023 has been centered around spot Bitcoin ETFs, giving investors an easy way to gain exposure to the leading cryptocurrency. Notably, the price of BTC has doubled since BlackRock’s first filing for a spot Bitcoin ETF.

The first day of trading for these ETFs broke trading volume records, with $4.6 billion worth of shares being traded. Analysts at QCP Capital noted that the inflows started to flip positive towards the end of January after a week of major outflows from Grayscale’s Bitcoin Trust GBTC. Things seem to have settled, and the total inflows into these have now even eclipsed the once-dominant ProShares BTC futures ETF.

Analysts at the trading firm also noted the current increase in CME margin requirement as a signal of continued BTC price growth. Notably, the increase in this CME margin across various exchanges resulted in widespread short covering Lunar New Year weekend.

Consequently, the spot price for BTC and forward spreads surged. Spreads are now around 11-12%, indicating a strong bullish sentiment as traders are willing to pay higher premiums.

Another market factor contributing to the surge was the sell-and-buy-the-dip that played out after the latest consumer price index (CPI) report came out higher than expected. Headline CPI was 3.1% actual compared to 2.9% expected, and Core CPI was 3.9% actual compared to 3.7% expected, leading to a minor sell-off of risky assets, which was short-lived.

The rally in Bitcoin is showing no signs of slowing down, and investors are starting to accumulate with a Fear Of Missing Out. Recent on-chain data shows that Bitcoin whales have purchased over 100,000 BTC worth $5 billion in the past five days. The number of whales holding more than 1,000 BTC now stands at 2,121, an increase of 74 new wallets in February.

In a recent CNBC interview, Ric Edelman, founder of the Digital Assets Council of Financial Professionals, predicted this inflow into spot Bitcoin ETFs would continue over the next two years and reach $150 billion by the end of 2025. Interest in Bitcoin will increase as more institutional investors get on board, cementing Bitcoin as an asset class amongst traditional investors.

Cover image from Dall-E, chart from Tradingview