Bitcoin Traders Were Taken Aback By The 11% Price Increase In Just 8 Days

BTC options and futures metrics revealed that both whales and market makers were bracing for a potential price crash preceding the rally to $43,000. 

Source: finance.yahoo.com

Despite the cautious sentiment in the market, Bitcoin's price surged by 11% within eight days after finding support at $38,500. This upward movement caught several investors off guard, including Arthur Hayes, co-founder of the exchange. Hayes had anticipated that heightened risks of inflation in the U.S. and geopolitical instability would lead to a downturn in risk assets, including Bitcoin. Contrary to these expectations, the price of Bitcoin experienced a significant rally to $43,000 on Jan. 30.

The unexpected surge in Bitcoin's price defied the predictions of many traders who were anticipating increased volatility leading to a downward price movement. The market sentiment, influenced by factors such as inflation concerns and geopolitical tensions, had initially pointed toward a potential decline. However, the subsequent price action demonstrated the resilience of Bitcoin, as it not only resisted a significant downturn but also experienced a notable rally.

Grayscale ETF and MT. Gox Worries Affected the Price of Bitcoin

On January 31, Bitcoin failed to maintain support at $43,000; however, the current price has exhibited a 30-day period of stability, suggesting that the factors triggering the initial negative impact may have been neutralized. Analysts propose that fear, uncertainty, and doubt (FUD) arose from the outflow of funds in the Grayscale spot Bitcoin Trust exchange-traded fund (ETF) and potential sales from clients receiving their coins from the defunct exchange. Notably, other spot Bitcoin ETF issuers like Fidelity, BlackRock, and BitWise have been counteracting much of the selling pressure from Grayscale’s GBTC. Despite this, Arthur Hayes highlights macroeconomic concerns, as recent U.S. inflation and growth data have led investors to revise expectations for interest rate cuts from the U.S. Federal Reserve in March.

Additional concerns were introduced on January 26 with the U.S. government's announcement of the sale of 2,934 BTC seized from the Silk Road hack, valued at nearly $120 million. However, analysts note that this quantity is relatively insignificant compared to the daily inflows attracted by recently launched spot Bitcoin ETFs, which surpass four times this amount. It is crucial to assess whether professional traders benefitted from the price surge. While there is a common belief that whales and market makers have an advantage in predicting significant price changes, utilizing advanced quantitative trading software and strategically positioned servers, they are not immune to substantial financial losses when the market experiences volatility.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.