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What is Causing the Increase in Bitcoin Prices Today?

Key Points:

  • Bitcoin’s price is up 5% today, reaching a two-week high of over $28,000.
  • The increase is attributed to a court ruling in favor of the Grayscale Bitcoin Trust in its case against the SEC.
  • Institutional interest in Bitcoin is growing, with companies like BlackRock and Fidelity Investments showing interest in BTC spot exchange-traded funds.
  • The supply of Bitcoin on exchanges is decreasing, signaling a bullish sentiment among investors.
  • Liquidations of BTC shorts have resulted in increased volatility and the potential for a short squeeze.
  • Despite the recent price increase, the market is still showing fear, according to the Bitcoin Fear & Greed Index.

Bitcoin’s price is up today, rising 5% with a sharp, upward candle that sent the price to a two-week high of over $28,000 after United States Court of Appeals Circuit Judge Neomi Rao sided with the Grayscale Bitcoin Trust (GBTC) in its case against the U.S. Securities and Exchange Commission (SEC).

The decision amplifies the recent growing institutional interest in Bitcoin (BTC) from companies like BlackRock and Fidelity Investments, both of which are scheduled to hear answers about their BTC spot exchange-traded funds (ETFs) on Sept. 2.

Bitcoin price. Source: TradingView

Institutional interest sparks a Bitcoin rally

Bitcoin’s price began the Aug. 29 rally after Rao vacated the SEC’s order to deny the GBTC spot ETF over “fraud” concerns. The decision comes after the company took the SEC to the appeals court to argue for the soundness of Bitcoin futures on June 30, 2022. While the order does not approve the spot ETF, Rao adjudged:

“Grayscale’s petition for review be granted and the Commission’s order be vacated, in accordance with the opinion of the court.”

The judge vacating the SEC’s Grayscale ETF denial has also provided a boost to the Grayscale ETF. The discount is approaching 2023 highs under 25%.

Grayscale holdings. Source: CoinGlass

To date, the SEC has refused to approve a spot Bitcoin ETF, despite numerous applicants — including BlackRock, Fidelity, Cathie Wood’s ARK and 21Shares, which has filed for approval three times.

BlackRock is the world’s largest asset manager, with over $8.5 trillion in assets under management. The firm will also utilize Coinbase to custody the BTC in the trust, according to the filing with the SEC. Starting in September, the SEC has a host of ETF decisions to approve, deny or delay.

ETF tracker. Source: Bloomberg

Lower exchange BTC supply

Coinciding with Bitcoin price gains on Aug. 29, the BTC supply on exchanges is dropping to the lowest level since January 2018.

BTC balance on exchanges. Source: Glassnode

The market perceives coins leaving crypto exchanges as a bullish signal, given traders typically withdraw their BTC when they want to hold it in self-custody long term.

Interestingly, on-chain data shows that exchanges have been shedding Bitcoin since May 18, 2023. In other words, large swaths of Bitcoin investors are positioning for a BTC price rally, even amid the elongated bear market trend of 2023.

Bitcoin exchange net position change. Source: Glassnode

Liquidations could be sending Bitcoin price higher

With Bitcoin continuing to leave exchanges, liquidations have less cushion, causing volatility. In the past 24 hours alone, over $46.5 million in BTC shorts have been liquidated, with over $100 million in shorts being liquidated across the crypto market.

Bitcoin liquidation heat map. Source: CoinGlass

Despite the short-seller losing streak, 48% of the futures market remains short on the Bitcoin price. With such a high ratio remaining skewed short, a potential opportunity for a short squeeze could happen, leading to greater Bitcoin price upside.

Bitcoin short vs. long ratio. Source: CoinGlass

The Bitcoin Fear & Greed Index

While the Bitcoin price is showing some bullish momentum in the short term after the Grayscale ruling and short liquidations, the Bitcoin Fear & Greed Index shows the market is still fearful, down over 13 points compared to the previous month.

Bitcoin Fear & Greed Index. Source: Alternative

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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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