Why Did the Cryptocurrency Market Rise?
This week, the cryptocurrency market experienced a dramatic crash 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) price briefly falling below $50,000. Following the weekend massacre, Bitcoin’s price rebounded significantly yesterday (8th), reclaiming the $60,000 mark.
Bitcoin rose by 6.4% in the past 24 hours, with its price standing at $61,223; Ethereum (ETH) also surpassed $2,600, increasing by 8.8% in the same timeframe.
Strong Performance in the U.S. Labor Market Data
The rapid recovery in prices is closely linked to the latest U.S. labor market data. The U.S. Department of Labor released data on August 5, indicating that for the week of July 28 to August 3, the number of initial unemployment claims fell from 250,000 the previous week to 233,000, below economists’ expectations of 240,000.
This data suggests that the U.S. labor market remains robust, alleviating market concerns about an economic recession and weakening expectations of significant interest rate cuts by the Federal Reserve in September.
Market Leverage Short Position Liquidation
Another major driving force behind Bitcoin’s price increase is the liquidation of leveraged short positions in the cryptocurrency market.
In the past 24 hours, over $114 million in short positions were liquidated, indicating that bearish pressure in the market is easing. Meanwhile, the open interest in Bitcoin futures contracts rose from $26.65 billion the previous day to $27.01 billion. This indicates an increased risk appetite for Bitcoin in the market, with investors beginning to re-enter.
Short Position: A trading strategy where one sells first and buys later to profit from the price difference.
Open Interest: Refers to derivatives contracts that have been bought or sold but not yet settled. Open interest can be seen as funds still in the market.
Bitcoin Whales Accelerate Accumulation, Exchange Balances Hit Five-Year Low
As the cryptocurrency market presented a “one-week-only special deal,” Bitcoin whales quickly entered the market to increase their holdings when prices fell below $50,000.
According to data from market analysis firm Santiment, wallet addresses holding between 10 and 1,000 Bitcoins reached their highest trading levels since early April on August 5 and 6, indicating that these major players took advantage of the price drop to acquire more coins.
This is a positive signal, as the continuous accumulation by whales reflects bullish sentiment among this group of investors regarding the cryptocurrency market.
Additionally, data from CryptoQuant shows that the balance of Bitcoin on exchanges has reached a five-year low, with only 2.68 million Bitcoins remaining. This represents an increasing number of investors moving Bitcoin to self-custody wallets, reducing their intent to sell, and anticipating that market prices will continue to rise.
References:
cointelegraph,
coindesk