Bitcoin has achieved a remarkable feat by reaching a new all-time high (ATH) of $69,300, a milestone that hasn’t been reached since the previous bull market peak over two years ago. The journey since November 2021 has been quite arduous for Bitcoin, as it lost momentum and entered a prolonged crypto winter. However, signs of hope emerged at the beginning of 2023, and since then, the price of BTC has steadily climbed, entering a new phase of price discovery.
During the price discovery phase, investors and traders often rely on historical data to guide their trades. However, once a new ATH is breached, the asset enters uncharted territory, where there are no established resistance or support levels to inform trading decisions.
To gain insight into what can be expected as Bitcoin enters this price discovery phase, Cointelegraph sought the expertise of veteran crypto investor and Bitcoin educator, Chris Dunn. In the short term, Dunn anticipates a domino effect that will propel the price of Bitcoin to even higher highs. The price of Bitcoin has been steadily climbing over the past year, but since February 16, it has experienced significant surges, characterized by mega green candles, leading to a 25% increase in price.
These unexpected green candles caught many Bitcoin short traders off-guard, resulting in the liquidation of $161 million in BTC shorts within a span of 24 hours on February 27. The total damage amounted to $268 million as short positions were liquidated when Bitcoin briefly touched the $57,000 mark. Despite expectations of a pullback, Bitcoin’s price has continued to surge without taking a break, finally surpassing the $69,000 level.
The liquidation of short positions occurs when traders who had bet on the price of Bitcoin falling are compelled to cover their positions by buying back the Bitcoin they sold, often at a higher price. This sudden surge in buying pressure can lead to a rapid increase in the price of Bitcoin and trigger a cascade effect known as a short squeeze. In a short squeeze, short sellers rush to buy back Bitcoin to cover their positions, driving the price even higher. This phenomenon can exacerbate price movements and result in significant volatility in the Bitcoin market.
Another factor contributing to the rapid increase in Bitcoin’s price is the approval of spot Bitcoin exchange-traded funds (ETFs) by the United States Securities and Exchange Commission. Since then, there has been a continuous influx of capital into these new financial products. BlackRock’s iShares Bitcoin Trust, for instance, surpassed $10 billion in assets under management in just over seven weeks. This is in stark contrast to the first U.S. gold-backed ETF, which took two years to reach the same milestone after its launch in 2004.
Market analyst and Reflexivity Research co-founder, Will Clemente, commented on how the inflows into Bitcoin ETFs have outperformed those of gold. The growing demand for Bitcoin from spot ETFs results in more BTC being purchased from the open market, further driving up the price.
Overall, this is an ongoing story, and more information will be provided as it becomes available.