Bitcoin (BTC) experienced a sharp uptick on March 29, as a classic short squeeze, that liquidated around 1,500 BTC worth of short positions, took the market to five-day highs, erasing the losses engendered by news that one of the largest crypto exchange, Binance, was being targeted by U.S. regulators.
BTC/USD hit $28,159 on Bitstamp as a band of shorts was “blown out” to remove resistance and allow higher levels to return.
Total BTC short liquidations for March 29 stood at nearly $20 million at the time of writing, according to analytics resource Coinglass. The abrupt uptick in BTC price came courtesy of exchanges.
Monitoring resource Material Indicators noted additional changes on the Binance spot order book, indicating that traders were preparing for potential buying opportunities should the downside enter again.
#FireCharts shows ~$25M in #Bitcoin bid liquidity that was stacked above the 200 Week MA, was moved down to ~$23.3k, presumably to defend the Monthly Close coming Friday after a fresh PCE report.
Meanwhile price is pumping.
If bulls run out of momentum before clearing $28k,… pic.twitter.com/oZpQPdql12
— Material Indicators (@MI_Algos) March 29, 2023
BTC Surges 72% in Q1 2023
Bitcoin has surged almost 72% to $28,500 this year, achieving its best quarterly gain in two years. This rally has lifted BTC’s market value to $542 billion, surpassing that of Ether, the second-largest cryptocurrency by market value.
The resurgence of Bitcoin has been fueled by speculation that central banks, particularly the US Federal Reserve, will abandon their aggressive rate increases in response to recession signals.
This sentiment gained momentum after three US banks collapsed, and the Fed launched emergency funding programs to stabilize the banking sector.
The Fed’s balance sheet has recently expanded by $300 billion, undoing months of quantitative tightening. Traders are now anticipating the Fed to begin an easing cycle in June with a 25 basis point rate cut, according to Fed Funds Futures.
Martin Leinweber, digital assets product strategist at MarketVector Indexes, said that “among all risk assets, bitcoin stands out as being the most sensitive to liquidity swings,” and the expectation of new easing measures by central banks, particularly the Fed, is the driving force behind BTC’s recent rally.
“Crypto in general, especially #Bitcoin, stands out as being the most sensitive to liquidity. It’s still a #riskasset, but Bitcoin doesn’t have the same vulnerabilities as stocks and bonds do,” I noted on @CoinDesk regarding how digital assets are responding to #banking stress https://t.co/suiILnKwXW
— Martin Leinweber (@mleinweber2) March 28, 2023
David Foley, managing partner at Bitcoin Opportunity Fund, believes that assets with sound money appeal, such as bitcoin and gold, are benefitting from the liquidity injections.
“With the Fed suddenly turning on a dime, having to throw some QE back into the system to protect the banking system, money flows into sound money assets: gold, silver. And bitcoin being sound money is going to be the fastest in the race,” Foley said.
BTC’s worsening order book depth has also played a significant role in the price surge. The depth has steadily decreased since the collapse of FTX, reaching a 10-month low earlier this month. This has made it easier to trade in and out of large trades at stable prices, boosting BTC’s price further.
