Why is the Cryptocurrency Market Rising?
This week, the cryptocurrency market experienced a sharp collapse influenced by several factors, including sell-offs by Jump Trading, ETF fund flows, the U.S. presidential election, and escalating tensions in the Middle East, with Bitcoin (BTC) prices briefly dropping below $50,000. Following the weekend massacre, Bitcoin prices rebounded significantly yesterday (8th), reclaiming the $60,000 mark.
Bitcoin rose by 6.4% in the past 24 hours, with prices landing at $61,223; Ethereum (ETH) also surpassed $2,600, increasing by 8.8% in the same timeframe.
Strong Performance in U.S. Labor Market Data
The rapid price recovery is closely tied to the latest U.S. labor market data. The U.S. Department of Labor released data on August 5, showing that the number of first-time applicants for unemployment benefits dropped from 250,000 the previous week to 233,000 for the week ending August 3, lower than economists’ expectations of 240,000.
This data indicates that the U.S. labor market remains strong and alleviates concerns about an economic recession, diminishing expectations for significant interest rate cuts by the Federal Reserve in September.
Market Leverage Short Liquidation
Another significant driver of Bitcoin’s price increase comes from the liquidation of leveraged short positions in the cryptocurrency market.
In the past 24 hours, over $114 million in short positions were liquidated, indicating a reduction in market short pressure. Meanwhile, the number of open contracts for Bitcoin futures also increased, rising from $26.65 billion the previous day to $27.01 billion. This suggests that market risk appetite for Bitcoin is rising, as investors begin to re-enter the market.
Short Position: A trading strategy that involves selling first and buying later to profit from price differences.
Open Contracts: Refers to derivative contracts that have been bought or sold but not yet settled. Open interest can be seen as capital still active in the market.
Bitcoin Whales Accelerate Accumulation, Exchange Balances Reach Five-Year Low
As the cryptocurrency market experienced a “one-week limited-time offer,” Bitcoin whales rapidly increased their holdings when prices dipped below $50,000.
According to data from market analysis firm Santiment, wallet addresses holding 10 to 1,000 Bitcoins reached their highest trading levels since early April on August 5 and 6, indicating that these large investors capitalized on the price drop to accumulate more coins.
This is a positive signal, as the continued accumulation by large investors reflects bullish sentiment toward the cryptocurrency market.
Additionally, data from CryptoQuant shows that Bitcoin balances on exchanges have reached a five-year low, with only 2.68 million Bitcoins remaining. This indicates that more investors are transferring their Bitcoins to self-custody wallets, reducing selling intentions, and anticipating further price increases in the future.
Reference Sources:
cointelegraph, coindesk