Bitcoin (BTC) surged to a fresh high of $53,019 on February 20th before experiencing a sudden drop to $50,000 on certain exchanges. Traders attribute the price movement to consistent inflows of BTC from spot Bitcoin ETFs and the upcoming supply halving event. As of now, BTC is trading above $52,100.
Let’s explore the main factors contributing to the current volatility of Bitcoin’s price.
Bitcoin futures open interest has reached a 26-month high. The total open interest for BTC futures hit $22.69 billion on February 20th, the highest level since November 11th, 2021. This surge in open interest indicates increased trading activity surrounding the largest cryptocurrency by market capitalization. The increase in Bitcoin futures open interest aligns with the 23% year-to-date rally of Bitcoin to $53,000.
Spot Bitcoin ETF inflows have also played a significant role in the bullish sentiment among investors. Despite outflows from gold ETFs, inflows to spot BTC ETFs have continued to rise. 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. Last week alone, the total weekly inflows into newly issued spot Bitcoin ETFs reached $2.5 billion.
Analysts have highlighted the steady increase in net inflows to spot Bitcoin ETFs, with an average of $182 million per day. They believe that post-halving, a daily net inflow of approximately $25 million to spot ETFs could offset miner production.
The upcoming Bitcoin halving event, which will reduce miner rewards by 50%, is expected to further fuel investors’ interest in BTC. Historically, the halving event has preceded a parabolic uptrend in Bitcoin’s price in the months following the event.
Bitcoin traders are now focused on the next leg of the current rally. The In/Out of the Money Around Price (IOMAP) model shows that a significant number of BTCs were acquired at an average cost of $52,081. Some of these BTCs may be sold as investors break even, creating resistance around this price level.
Traders are determined to maintain the price above $52,000, and the support zone between $52,000 and $51,700 is expected to be a battleground. A close above or below this area will determine the direction of Bitcoin’s next move.
Please note that this article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment or trading decisions.