Bitcoin price hit the $29,000 mark today for the first time since last Thursday. The decisive impulse was given yesterday by the news that First Republic Bank, the next big bank in the US, is about to be seized by the US Federal Reserve and FDIC.
As was the case after the collapse of Silicon Valley Bank, the news sparked a rally for Bitcoin that initially catapulted the price above the crucial resistance level of $27,800 before a brief consolidation and then a continuation of price appreciation.
With the response, Bitcoin bolsters its digital gold story. As analyst James V. Straten predicts, the correlation between Bitcoin and gold will continue to increase as interest rates remain high and weak banks are purged. Even on a 30-day moving average, the correlation stands at 57%, the highest level in nearly 2 years.
Bitcoin’s 30-day rolling correlation to gold has surged since March and now stands at 57% — the highest level in nearly 2 years.#BTC #Gold #correlation pic.twitter.com/l7N5eYAgEl
— Kaiko (@KaikoData) April 26, 2023
More reasons for the Bitcoin rally
Another reason was presented by analyst James Choi, who believes the market is ahead of the US Federal Reserve (Fed). According to Choi, the second wave of bank failures, led by First Republic Bank, will cause the Fed to pump more liquidity into the financial system. The “market is a liquidity junkie and has already priced this in.”
As Bitcoinist reported today the M2 money supply has fallen to an all-time low in 90 years. Every time money has been cut to this degree in the history of the United States, there has been a recession and a banking crisis.
Popular analyst Ted (@tedtalksmacro) agrees. According to him, liquidity has been the indicator that has led Bitcoin’s price in recent weeks, while most of the data has lagged behind.
1/ While most of the data lags, price usually leads to monetary + fiscal liquidity…
Let’s quickly examine whether liquidity has peaked or whether new highs are on the way 👇 pic.twitter.com/PXgFv47xU6
— tedtalksmacro (@tedtalksmacro) April 25, 2023
According to him, the price increase of BTC since mid-March is due to increased global liquidity, in particular: the US debt ceiling, with which the Treasury draws on its cash reserves; the banking crisis, which led to the expansion of the Fed’s balance sheet; and stimulating the Chinese economy through accommodative monetary policy after the end of Zero-Covid.
From a technical point of view, liquidation of short positions in the futures market and funding rates again played a role in the price movement. Bitcoin perps started turning negative as open interest increased slightly. As a result, there was a short squeeze, as Straten points out.
#Bitcoin offenders are starting to turn negative as outstanding interest rises slightly, time for a short squeeze. pic.twitter.com/6O00Kt3BB2
— James V. Streets (@jimmyvs24) April 26, 2023
Renowned trader @52skew meanwhile noted, “$BTC Binance Market CVDs & Delta: Most of this bounce settled in shorts, but big binance spot buyers came in before the price could roll, leading to another squeeze.” Even after the move above $29,000, shorts that were liquidated are piling up.
$BTC Binance open interest
Those revenge pants are starting to squeeze hereFinancing even more negative than it used to be lol https://t.co/5Ool5mWmNP pic.twitter.com/KPpFecZXae
— Slant Δ (@52kskew) April 26, 2023
At the time of writing, Bitcoin price was trading at $28,865, with an eye on the next level of resistance at $30,000.
Featured image from iStock, chart from TradingView.com
