Key Points
- Bitcoin (BTC) price peaked at a new 2024 high of $53,019 on Feb. 20, before a sudden drop to $50,000 on some platforms.
- Spot BTC ETF inflows and the impending supply halving event are cited as significant factors behind the price movement.
On February 20, 2024, the price of Bitcoin (BTC) surged to a new high for the year at $53,019, before suddenly dropping to $50,000 on certain exchanges.
Consistent inflows into spot BTC ETFs and the upcoming supply halving event are being pointed to as major reasons behind this price movement.
At the time this article was written, the price of BTC was trading above $52,100.
Understanding Bitcoin's Price Volatility
The open interest (OI) in Bitcoin futures has reached a new yearly high, reflecting increased trading activity around the largest cryptocurrency by market cap.
Data from Coinglass, a cryptocurrency futures trading and information platform, reveals that the total OI for BTC futures reached $22.69 billion on Feb. 20, the highest since November 11, 2021.
This closely approaches the peak of $23 billion recorded then.
Open interest is a measure of the total value of all outstanding or “unsettled” Bitcoin futures contracts across exchanges, with an increasing value indicating increased market activity and trader sentiment around Bitcoin.
The continued bullish sentiment from investors seems to be fueled by increasing inflows to the spot BTC ETFs, even as outflows from gold ETFs increase.
Bitcoin has surpassed the $49,000 high reached after the Jan. 10 approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission.
Data from Farside Investors shows that $4.91 billion have been poured into Bitcoin ETFs within six weeks since trading began on Jan. 11.
The total weekly inflows into the newly issued spot Bitcoin ETFs hit $2.5 billion last week, according to CoinShares Digital Asset Fund Flows Weekly Report.
CoinShares analyst James Butterfill stated, “These inflows, coupled with recent positive price moves, have elevated the total assets under management (AuM) to US$67 billion, marking the highest level since December 2021.”
The upcoming Bitcoin halving, expected to reduce the rewards given to miners by 50%, is also anticipated to play a significant part in further fueling investors’ interest in BTC.
Historically, the halving event has preceded Bitcoin entering a parabolic uptrend in the months following the event.
Data from IntoTheBlock show Bitcoin traders focused on the next leg of the current rally.
The In/Out of the Money Around Price (IOMAP) model shows a large number of BTCs were previously acquired at an average cost of $52,081.
Some of these may be liquidated as the investors break even, suggesting stiff resistance around this area.
What is clear is that traders are determined to see the price hold above $52,000.
According to independent analyst Ali, the buyers are now bracing for a new battle to defend the support zone between $52,000 and $51,700.
A close above or below this area “will determine the direction of $BTC next move”.
