5 reasons why Bitcoin price has reclaimed $33,000 and may continue to rise

Two weeks ago, few investors expected the price of Bitcoin (BTC) to rise above $20,000. In fact, most predicted a maximum of $30,000 by mid-2022 or late 2023.

This means that many Bitcoin holders may have been caught by surprise as the price of Bitcoin surged to $34,800 just 17 days after breaking the $20,000 mark.

Overall, analysts expect Bitcoin to see a sharp correction after its 150% rally since November, but there are currently no fundamental indicators to support this view.

BTC/USD 4-hour chart. Source: TradingView

Despite the recent euphoria surrounding Bitcoin’s price action, the recent price crash of $5,600 in 3 hours has resulted in the liquidation of over $1.2 billion in contracts, a price action that would normally raise red flags and lead analysts to predict a possible reversal of trend.

Every time Bitcoin hits a new high, investors expect some form of pullback. Although Bitcoin failed to break through the $34,500 resistance level, it quickly rebounded from the low of less than $28,000 on January 4. From a financial perspective, this market performance may temporarily panic some buyers, but from the back of the story, it is a very bullish sign.

Over the past week, Bitcoin’s dominance rose to its highest level since March 2017 at 73%. Significant buying activity from institutional investors has been linked to this, including Grayscale’s accumulation of 72,950 BTC in December.

Moreover, investments by MicroStrategy, Ruffer Investment, MassMutual, and Skybridge Capital are further indisputable evidence of the inflow of institutional money. As a result, Bitcoin is becoming their preferred, almost only, investment option among cryptocurrencies.

Bitcoin’s dominance decline sparks a mini alt season

Regardless of the actions of professional traders, retail traders have a huge impact on altcoins. Therefore, Bitcoin’s rebound has created opportunities for alt season, and DeFi-related tokens seem to benefit the most.

Top performing cryptocurrencies of the week Source: Nomics

Over the past week, Bitcoin outperformed the top 15 altcoins, which gained an average of 9%. More importantly, total trading volume soared, dispelling any concerns about low market participation over the weekend or holidays.

Grayscale’s GBTC premium has returned to normal

The premium on Grayscale Bitcoin Trust (GBTC) peaked at 41% on December 21, but has since adjusted to a 90-day average of 19%. It is worth noting that only qualified institutional clients can buy shares directly from Grayscale. The rest of the traders need to buy on the secondary market, which is why the price is distorted.

Grayscale Bitcoin Trust Premium Source: TradingView and Grayscale

This unusual level can be partly explained by the suspension of new share issuance. By stopping offers to institutional clients, any additional demand needs to be met through secondary sales, creating pressure for higher premiums.

Perpetual futures funding rates remain stable

Professional traders tend to dominate long-term futures contracts with fixed expiration dates. Therefore, by measuring how much more expensive futures are than regular spot markets, traders can gauge their bullishness. 3-month expiration futures often trade at a premium of 1.5% or more to regular spot trading.

When this indicator weakens or turns negative, it is a warning sign. This situation, also known as backwardation, indicates that the market is turning bearish.

BTC perpetual futures funding rate Source: Digital Assets Data

The chart above shows that this indicator briefly remained above 5%, approaching overbought levels. However, despite Bitcoin’s recent drop to $28,000 on January 4, this indicator has remained above 3%.

As a result, the indicator has remained above the 1.5% threshold, indicating optimism among professional traders. This reading is slightly positive as the recent unexpected volatility has not shaken buyers.

On the other hand, it would be worrisome if large-scale liquidations led to long deleveraging.

Social networking activity peaks

Bitcoin Twitter user activity vs USD price Source: TheTie

Data from TheTie also showed that with the recent rise in Bitcoin prices, tweets related to "Bitcoin" reached their highest level since December 2017.

While a notable increase in Twitter activity doesn’t necessarily equate to strong retail buying, it certainly helps to attract more attention as the cryptocurrency continues its upward trend.

Option Put Call Ratio

The best way to gauge overall market sentiment is to measure whether more activity is in call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, while put options are used for bearish strategies.

The put/call ratio of 0.70 indicates that put open interest is 30% lower than call options, so the market is mostly bullish.

In contrast, a put/call ratio of 1.2 indicates that put open interest is 20% greater than call options, which can be considered bearish. One thing to note is that this metric aggregates the entire Bitcoin options market.

Bitcoin options put/call ratio. Source: Cryptorank.io

Investors have been leaning towards downside protection strategies over the past week. As a result, the ratio of put options has increased to 0.68 from 0.56 on December 27. As a result, this indicator is back to its 3-month average, with the ratio of call options at 32%.

The data suggests that investor optimism remains relatively stable after Bitcoin prices rose 17% last week.

Overall, all five of the above indicators remain in neutral to bullish territory. Despite the price volatility on January 4, professional traders have maintained their bullish stance, which is an encouraging result for bulls.

As Bitcoin quickly regained the $31,000 support level, bulls showed their confidence by accumulating positions after each dip. All in all, there are no signs of buyer exhaustion or excessive leverage. (Cointelegraph)