Bitcoin (BTC) experienced a surge in price, reaching a new high for 2024 at $53,019 on February 20th, before dropping suddenly to $50,000 on certain exchanges. Traders attribute this price movement to consistent inflows of BTC into spot Bitcoin ETFs and the upcoming supply halving event. As of the time of writing, BTC is trading above $52,100.
One of the primary reasons for Bitcoin’s current volatility is the rise in open interest (OI) for Bitcoin futures. OI has reached its highest level in 26 months, indicating increased trading activity for the largest cryptocurrency by market capitalization. Data from Coinglass, a cryptocurrency futures trading and information platform, shows that the total OI for BTC futures reached $22.69 billion on February 20th, the highest since November 11, 2021, approaching the previous peak of $23 billion.
The increase in Bitcoin futures OI aligns with the 30% rally in Bitcoin’s price this year, reaching $53,000, which is the highest level since December 2021. Open interest is a measure of the total value of all outstanding Bitcoin futures contracts across exchanges. An increasing value suggests higher market activity and trader sentiment surrounding Bitcoin.
Another factor contributing to Bitcoin’s volatility is the inflow of funds into spot Bitcoin ETFs. Despite outflows from gold ETFs, investors are showing bullish sentiment towards Bitcoin. Since the approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission on January 10th, $4.91 billion has been invested in Bitcoin ETFs within six weeks of trading. The total weekly inflows into newly issued spot Bitcoin ETFs reached $2.5 billion last week, according to CoinShares’ Digital Asset Fund Flows Weekly Report.
Analysts believe that the upcoming Bitcoin halving, which will reduce miner rewards by 50%, will further fuel investors’ interest in BTC. Historical data suggests that the halving event precedes a parabolic uptrend for Bitcoin in the months following the event.
Data from IntoTheBlock indicates that Bitcoin traders are focused on the next leg of the current rally. The In/Out of the Money Around Price (IOMAP) model shows that many BTCs were acquired at an average cost of $52,081. Some of these may be sold as investors break even, creating resistance around this price level.
Overall, traders are determined to maintain the price above $52,000. The direction of Bitcoin’s next move will depend on whether it closes above or below the support zone between $52,000 and $51,700.
Please note that this article does not provide investment advice or recommendations. It is important for readers to conduct their own research before making any investment or trading decisions.