Why is the Cryptocurrency Market Rising?
This week, the cryptocurrency market experienced a rapid collapse influenced by multiple factors, including a sell-off by Jump Trading, ETF fund flows, the U.S. presidential election, and escalating tensions in the Middle East, with Bitcoin (BTC) prices briefly dropping below $50,000. Following the weekend massacre, Bitcoin prices rebounded significantly yesterday (8th), regaining the $60,000 threshold.
Bitcoin rose by 6.4% in the past 24 hours, with prices settling at $61,223; Ethereum (ETH) also surpassed $2,600, increasing by 8.8% in the same timeframe.
Strong U.S. Labor Market Data
The rapid price recovery is closely tied to the latest labor market data from the United States. The U.S. Department of Labor released data on August 5, indicating that the number of first-time claims for unemployment benefits decreased from 250,000 the previous week to 233,000 for the week ending August 3, falling below economists’ expectations of 240,000.
This data signifies that the U.S. labor market remains robust, alleviating concerns about an economic recession and weakening expectations of a significant interest rate cut by the Federal Reserve in September.
Market Leverage Short Liquidation
Another significant driver behind the rise in Bitcoin prices comes from the liquidation of leveraged short positions in the cryptocurrency market.
In the past 24 hours, over $114 million in short positions were liquidated, indicating a reduction in bearish pressure in the market. At the same time, the number of open contracts for Bitcoin futures also increased, rising from $26.65 billion the previous day to $27.01 billion. This suggests that market risk appetite for Bitcoin is increasing, with investors beginning to re-enter the market.
Short Selling: A trading strategy where investors sell first and buy later to profit from the price difference.
Open Contracts: Derivative contracts that have been bought or sold but not yet settled. Open interest can be seen as capital still in the market.
Bitcoin Whales Accelerate Accumulation, Exchange Balances Reach Five-Year Low
With the cryptocurrency market experiencing a “one-week only special offer,” Bitcoin whales quickly entered the market to increase their holdings when prices fell below $50,000.
According to data from market analysis firm Santiment, wallet addresses holding 10 to 1,000 Bitcoins reached their highest trading levels since early April on August 5 and 6, indicating that these major players in the crypto space took advantage of the price drop to accumulate more coins.
This is a positive signal, as the continued accumulation by large investors reflects their bullish sentiment towards the cryptocurrency market.
Furthermore, data from CryptoQuant shows that Bitcoin balances on exchanges have reached a five-year low, with only 2.68 million Bitcoins remaining. This represents an increasing number of investors transferring Bitcoin to self-custody wallets, reducing their intent to sell, and anticipating that market prices will continue to rise.
References:
cointelegraph,
coindesk
