The Bitcoin price regained the $29,000 mark today for the first time since last Thursday. The decisive impulse was provided yesterday by the news that with 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 triggered a rally for Bitcoin that initially catapulted the price above the crucial $27,800 resistance level before a brief consolidation and then continuation of the price surge took place.
With the reaction, Bitcoin is strengthening its digital gold narrative. 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 rolling average, the correlation stands at 57%, its highest level in almost 2 years.
Bitcoin 30-day rolling correlation with gold has surged since March and now stands at 57% – its highest level in almost 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 that the market is front-running 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 already pricing this in.”
As Bitcoinist reported today, the M2 money supply has fallen to a historic 90-year low. Every time money has been slashed to this extent in the history of the United States, there has been a recession and banking crisis.
Popular analyst Ted (@tedtalksmacro) agrees. According to him, liquidity has been the indicator that has led the Bitcoin price in recent weeks, while most data has lagged.
1/ While most data is lagging, what tends to lead price is monetary + fiscal liquidity…
Let’s quickly investigate whether liquidity has peaked or if new highs are to come pic.twitter.com/PXgFv47xU6
— tedtalksmacro (@tedtalksmacro) April 25, 2023
According to him, the BTC price rise since mid-March is due to increased global liquidity, specifically: the US debt ceiling, with which the Treasury is drawing on its cash reserves; the banking crisis, which led to the expansion of the Fed’s balance sheet; and the stimulation of the Chinese economy through loose monetary policy after the end of Zero-Covid.
From a technical perspective, liquidation of shorts in the futures market and funding rates once again played a role in the price move. Bitcoin perps had started to go negative while open interest was rising slightly. As a result, there was a short squeeze, as Straten notes.
#Bitcoin perps have started to go negative, while open interest increases slightly, time for a short squeeze. pic.twitter.com/6O00Kt3BB2
— James V. Straten (@jimmyvs24) April 26, 2023
Renowned trader @52skew, meanwhile, noted, “$BTC Binance Market CVDs & Delta: Most of this bounce was unwinding in shorts, however large binance spot buyers came in before price could roll over leading to another squeeze.” Even after the move above $29,000, shorts which were liquidated are piling up.
$BTC Binance Open InterestThose revenge shorts are starting to get squeezed here
Funding even more negative than earlier lol https://t.co/5Ool5mWmNP pic.twitter.com/KPpFecZXae
— Skew Δ (@52kskew) April 26, 2023
At press time, the Bitcoin price traded at $28,865, eyeing the next resistance level at $30,000.