Reasons Behind Today’s Surge in Bitcoin Prices

Bitcoin is currently trading near its highest point in a month, buoyed by consecutive dovish signals from the central banks of the United States and Japan.

On September 20, Bitcoin surged approximately 2.5%, reaching over $64,120. This increase coincided with the Bank of Japan keeping interest rates steady following last month’s rate hike. This decision stands in contrast to the US Federal Reserve’s recent 50 basis point rate cut announced just a day earlier. The Fed’s move has alleviated concerns related to the unwinding of “yen carry trades,” which had previously caused Bitcoin’s price to plummet by nearly 25% in August.

Essentially, investors perceive no immediate threat of rising borrowing costs in Japan, allowing them to borrow Japanese yen at low rates and invest in higher-yielding assets such as Bitcoin. Additionally, the Federal Reserve’s substantial rate cut makes speculative investments more appealing, as the returns on safer assets remain low. This environment fosters confidence among investors to maintain or even increase their holdings in high-yield assets, thereby supporting Bitcoin’s upward movement.

Bitcoin’s OI, Funding Rates Hit Monthly Highs

The rise in Bitcoin’s price today is further supported by significant increases in both open interest (OI) and funding rates within its futures market. As of September 20, the total value of unsettled Bitcoin futures contracts reached approximately $34.39 billion, marking the highest level since August 26. Concurrently, funding rates climbed to around 0.189% per week, recovering from negative figures earlier in the month.

An increase in open interest typically indicates that more capital is entering the market, often signaling expectations of substantial price movements. This suggests that traders are actively positioning themselves, potentially anticipating further increases in Bitcoin’s price. The shift in funding rates from negative to positive territory reflects a more optimistic market sentiment, with more traders willing to pay the funding cost to hold long positions, expecting Bitcoin’s price to continue its upward trajectory.

Bitcoin Nears Bull Flag Breakout

Today’s gains for Bitcoin are part of a larger rebound that began last week when the cryptocurrency tested the lower boundary of its current bull flag pattern. The price is now approaching the upper trendline of the flag, around $65,500, with a potential breakout target of $78,400. Typically, the upside target for a bull flag is calculated by adding the breakout point to the height of the preceding uptrend, suggesting significant potential for further gains if the breakout occurs as anticipated.

This technical setup indicates that Bitcoin may be on the verge of a strong upward move, supported by both fundamental factors from central bank policies and positive developments in the futures market. Investors and traders are closely monitoring these indicators, positioning themselves to capitalize on the expected continuation of the bullish trend.

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