The Defiant Featured Zerocap | Bitcoin Breaks $65K as Short Traders Face Liquidations

Read more in a recent article in The Defiant and our 14th October Edition Weekly Wrap.

16 October, 2024: The cryptocurrency market experienced a significant rally this week, with Bitcoin (BTC) surpassing the $65,000 mark, causing a cascade of short position liquidations. Over $57 million in Bitcoin shorts were liquidated in a 24-hour span, while total liquidations across the cryptocurrency market exceeded $180 million, impacting more than 56,000 traders (The Defiant).

As Bitcoin’s price surge accelerated, short traders were caught off guard by the sudden spike, leading to mass liquidations. This market movement is the result of a confluence of technical, political, and broader market factors. In this article, we explore the underlying reasons behind Bitcoin’s price rally and what it means for investors in the coming weeks.

Cryptocurrency Rally: Bitcoin and Altcoins Soar

Bitcoin’s price soared by more than 5%, crossing the $65,000 milestone. Other digital assets followed suit, with Ethereum (ETH) jumping over 7% to trade above $2,600. Solana (SOL) and Polkadot (DOT) also posted gains of more than 7% and 5%, respectively.

These gains come at a time when the broader market is in an upswing. Jonathan de Wet, Chief Investment Officer at Zerocap, commented on this development: “We’ve seen a textbook break of trendline resistance, and the bounce this week from trendline support.” This technical breakout provided the foundation for Bitcoin’s rise and set the stage for a potential continuation of this bullish trend.

De Wet added, “Despite the US rate cutting cycle moderating, equities, crypto, and risk assets are on a bit of a tear.” He explained that while risks remain—such as the heightened volatility index (VIX), geopolitical tensions in the Middle East, and uncertainties around China’s economic stimulus—Bitcoin and other cryptocurrencies have defied these concerns, continuing their upward momentum.

Short Sellers Hit Hard

The recent surge in Bitcoin’s price triggered the liquidation of short positions, particularly for traders who bet against the market. Data from CoinGlass shows that more than $57 million worth of Bitcoin shorts were wiped out within 24 hours, contributing to a total market liquidation of over $180 million.

Jonathan de Wet of Zerocap pointed out that these liquidations are part of the broader market dynamics: “Bitcoin has some notable catalysts, including Michael Saylor’s announcement that MicroStrategy will pursue becoming a ‘Bitcoin bank,’ which is big news.” MicroStrategy, with a Bitcoin inventory exceeding $15 billion, has plans to offer Bitcoin-backed financial services, giving the company an edge in the market. This, in turn, has provided a boost to Bitcoin’s price as investors become more confident in its future use cases and broader adoption.

De Wet also emphasized that, despite concerns about market exuberance, the upside potential for Bitcoin remains strong: “We see BTCUSD at $70,000 in the coming weeks, continuing off current downside support, with equities breaking further highs.”

Low Public Interest But Strong Market Indicators

Interestingly, Bitcoin’s rally comes at a time when public interest, as measured by Google search trends, is at its lowest level since October 2023. According to Google Trends, the global search volume for “Bitcoin” has dropped significantly, sitting at a value of 14, compared to a peak of 100 in May 2021.

While this may seem counterintuitive, analysts often view low search interest as a bullish signal. Historically, Bitcoin’s price has surged following periods of low public interest, as long-term investors quietly accumulate during these periods of market calm.

Ryan Lee, Chief Analyst at Bitget Research, noted, “The last time search interest was this low, Bitcoin rallied from $41,000 to nearly $71,500 in a few short weeks (The Defiant). This suggests that market players may be quietly accumulating during periods of reduced retail interest, which often precedes significant price increases.”

Jonathan de Wet reinforced this view, stating, “Periods of low public interest are often followed by strong upward movements. This could be a strategic time for investors to enter the market, taking advantage of lower volatility before another price surge.”

Political Developments and Market Drivers

Political factors have also played a critical role in the recent cryptocurrency rally. Digital asset investment products saw inflows of $407 million over the past week, with Bitcoin leading the pack at $419 million, according to CoinShares’ latest report (The Defiant). This surge in inflows comes despite a sell-off in the previous week, driven by political developments surrounding the upcoming U.S. elections.

“The upcoming election is a critical event,” de Wet noted, “and the polls have swung from Trump to Harris, and now look to be a deadlocked draw. The upside convexity on a Trump win is worth being long, and we are seeing market participants building positions in the lead-up.”

Political uncertainties, especially around cryptocurrency regulation, have heightened investor interest in Bitcoin as a hedge against potential regulatory changes. Republicans are generally viewed as more supportive of digital assets, and a win for the party could lead to a more favorable regulatory environment for cryptocurrencies.

Ethereum and Altcoin Performance

While Bitcoin stole the spotlight, other cryptocurrencies also saw significant gains. Ethereum, the second-largest cryptocurrency by market cap, rose by more than 7%, crossing the $2,600 mark. Solana and Polkadot also posted notable gains, reflecting broader investor optimism in the market.

Jonathan de Wet highlighted Ethereum’s recent performance, stating, “ETH has found its base and is rallying alongside other risk assets, overtaking BTC’s return on a 7-day and 1-day basis.” However, he still views Bitcoin as the stronger asset in the long term due to its structural advantages.

De Wet also pointed to the importance of the upcoming Ethereum 2.0 upgrades, which are expected to improve the network’s scalability and security. Nevertheless, Ethereum has seen outflows from its spot ETFs, with $9.8 million withdrawn last week, indicating that some investors are reallocating capital toward other assets.

Broader Market Context: Stocks and Economic Data

The cryptocurrency rally occurred against the backdrop of a relatively flat U.S. stock market. Major indexes posted gains of less than 1%, as investors awaited corporate earnings reports. Meanwhile, the U.S. Consumer Price Index (CPI) showed that prices rose at an annualized 2.4% in September, slightly above expectations.

De Wet cautioned that broader market risks could still impact both equities and crypto: “The VIX volatility index is above 20, showing that markets are a little heightened to upcoming risk factors—namely, the increasing chances of Middle East tensions growing, the China stimulus program wobble, and perhaps a touch of skepticism in a market that is over-exuberant in the current context.”

Despite these concerns, the cryptocurrency market has remained resilient, continuing its upward trajectory even as traditional assets remain relatively stagnant.

Final Thoughts

Bitcoin’s break above $65,000 marks a significant milestone in its current rally, with short traders facing substantial losses. Jonathan de Wet of Zerocap remains optimistic about Bitcoin’s future, predicting that it could reach $70,000 in the coming weeks. While risks remain, including geopolitical tensions and economic uncertainties, Bitcoin and other digital assets appear poised for continued growth, driven by strong technical indicators and growing institutional interest.

As the market heads into the final months of 2024, investors may find this period of low public interest and heightened political uncertainty to be an opportune time to enter the cryptocurrency space, capitalizing on Bitcoin’s long-term potential.

Disclaimer

This article includes a summary of content originally published in The Defiant and our 14th October Edition Weekly Wrap. The information is intended for informational purposes only. Zerocap does not endorse or approve any specific content or viewpoints contained in the original articles.

Zerocap are not regulated by ASIC. Zerocap Pty Ltd is registered with AUSTRAC as a Digital Currency Exchange (DCE) service provider (DCE100635539-001) and is a Corporate Authorised Representative (CAR: 001289130) under an ASIC regulated licensee (AFSL 340799) to serve financial products and services.

www.zerocap.com