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The Bitcoin price rally is losing strength as the cryptocurrency returns to its support levels following weeks of bullish momentum. In the short term, the landscape seems sloped to the downside, but an analyst presented the main reasons why the rally has just begun.

As of this writing, Bitcoin (BTC) trades at $36,550 with a 2% loss in the last 24 hours. Over the previous week, the cryptocurrency recorded similar losses following the general sentiment in the market. Only Solana (SOL) preserved its gains during the same period.

Bitcoin BTC BTCUSDT
BTC’s price trends to the upside on the daily chart. Source: BTCUSDT on Tradingview

Behind Bitcoin’s Surge: Decoding the Four Key Factors

According to a report from Deribit Insight, posted by Markus Thielen, several forces are pushing Bitcoin towards new yearly highs. These forces remain intact despite the recent price action.

Among the reasons behind the current BTC price rally, the analyst included speculations around the U.S. Securities And Exchange Commission (SEC) Bitcoin Exchange Traded Fund decision, traders’ appetite for leverage, fiat inflows through stablecoins, and increased fee generation within the Bitcoin network.

SEC’s Decision On The Bitcoin ETFs

A significant driver is the anticipation surrounding the SEC’s approval of a spot Bitcoin ETF. Despite passing the second deadline in mid-October without any announcement, the market remains watchful, with the third deadline set for mid-January 2024. The uncertainty surrounding this decision has led to fluctuations in implied volatility, influencing Bitcoin’s value.

Leveraged Positions and Futures Market

The demand for leveraged positions in Bitcoin, primarily through perpetual futures markets, indicates a strong interest in trading the BTC/USDT pair. This was evident when the funding premium reached an annualized +28% on November 13.

In addition, the BTC options market saw an uptick in realized volatility. The increase in the metric signals risk appetite for investors.

The chart below shows that the metric approaches its 5-year average. However, the analyst believes that volatility should decline as the year ends, suggesting that Bitcoin will follow a sideways trajectory in the short term.

Bitcoin price BTC BTCUSDT options crypto
BTC’s Realized Volatility returns to a 5-year average. Source: Deribit

Influx of Fiat Via Stablecoins

Another crucial aspect is the substantial fiat inflow into cryptocurrencies, mainly through Tether’s USDT, indicating fresh capital entering the crypto space. With over $3.8 billion moving into crypto in the last 30 days, this influx has had a notable impact, especially on altcoins, reflecting growing investor confidence.

Increased Bitcoin Network Activity

The Bitcoin network’s fee generation signals heightened activity, reaching $54 million. The report claims that this growth in network usage, partly driven by the resurgence of Ordinals and support from major exchanges, underscores the fundamental strength of the Bitcoin ecosystem.

Despite these positive indicators, the absence of an SEC Bitcoin ETF approval and a reduction in leveraged long positions might prevent Bitcoin from soaring past the $40,000 mark. However, the ongoing solid fiat inflows and a robust, fee-generating Bitcoin network provide grounds for cautious optimism.

Bitcoin’s journey remains captivating as it navigates regulatory decisions, market strategies, and evolving investor sentiment.

Cover image from Unsplash, chart from Tradingview


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