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Bitcoin Price Boost Brings Solana up 15% as Bears Lose $94 Million

Published October 2, 2023 12:09 PM
Teuta Franjkovic
Published October 2, 2023 12:09 PM

Key Takeaways

  • Bitcoin has reached its highest price in over a month, breaking the $28,000 barrier.
  • Short liquidations on crypto-tracked futures, totaling $94M, led to a “short squeeze” and contributed to the BTC rise.
  • Solana saw significant gains, up by nearly 15%, as traders gained faith in the network.
  • The anticipation of ETF approvals and positive macroeconomic developments further support this bullish sentiment.
  • Factors such as the avoidance of a US government shutdown and speculation about the Fed’s rate hikes have contributed to the positive sentiment.

On Monday, Bitcoin (BTC) surpassed the $28,000 barrier to reach its highest price in more than a month. Analysts cited seasonality and ETF optimism as a few factors contributing to the increases.

Last week, traders at the Japanese exchange Bitbank  were already keeping an eye on the $28,000 mark for Bitcoin. In the previous bull market, the $28,500 served as a significant support level. In the next weeks, it may turn into a level of resistance, making it an important price level to watch for.

Short Selling Liquidations

The surge in Bitcoin and Ether prices could be attributed to short liquidations in cryptocurrency futures markets. Approximately $94 million worth of bets against price increases were impacted on Sunday, leading to a “short squeeze.” This occurs when short sellers are forced to buy shares to cover their positions, creating excess demand and a scarcity of available stock.

The data reveals that almost 30,000 negative bets were settled, the majority of which happened on the cryptocurrency market OKX.

Liquidation happens when a trader’s leveraged position is forcibly closed by an exchange due to a loss of their initial margin. It occurs when a trader cannot fund or meet the margin requirements for their leveraged trade.

Some traders attributed Sunday’s advances elsewhere to past seasonality.

Solana Takes the Lead in Altcoin Surge

In the last day, Ether (ETH) crossed the $1,700 mark, Bnb (BNB), Cardano (ADA), and Polygon (MATIC) all saw price increases. Solana’s SOL tokens  are the reason behind most of the gains, up almost 15%, mostly because of some traders’ newfound faith in the network.

Solana (SOL) has had a strong week, gaining over 25%. Open interest  in Solana now stands at $321.13 million, up 2.37% from the previous session. In the last 24 hours, the long/short ratio is 0.965, with short holdings at $534.18K and long positions at $304.30K.

The SOL price may encounter probable resistance at $25 and $27. If it breaks out above these levels, it might rise to $32 in the future. A downturn, however, can resume if it fails to hold its current position, leading to potential support levels at $18 and $16.

Some significant events in the Solana ecosystem provide the background to the SOL price momentum. Solana announced their merger with leading global e-commerce platform Shopify back in August 2023.

The partnership would let millions of businesses to take blockchain payments with ease by immediately integrating Solana Pay, a decentralised payment protocol, into Shopify’s platform.

Analyzing the Macro Landscape

Several events have had a positive impact on Bitcoin’s price. Firstly, they discussed the looming threat of a US government shutdown . Although this risk has arisen in the past due to disagreements over government spending, it has been resolved.

Just hours before a crucial midnight deadline when funding for federal agencies was due to run out, President Joe Biden signed the short-term spending package passed by Congress into law.

On Saturday evening, the Senate approved the legislation, following an unexpected shift in the House earlier in the day, where lawmakers passed a bipartisan bill to prolong government funding. This came after several days of uncertainty regarding the possibility of avoiding a government shutdown.

The second factor is the growing speculation that the Federal Reserve may have concluded its rate hikes. While this is still uncertain and has been a topic of discussion for some time, recent developments have eased some concerns. However, it’s important to note that this situation remains fluid, and market sentiment can shift unexpectedly.

Third factor may be the optimistic retail sales and factory output data from China  last month which have rejuvenated risk sentiment in financial markets. This has paved the way for continued price increases in the leading cryptocurrencies.

Altcoins Downtrend on the Horizon?

The recovery has the potential to expose altcoin bears who engaged in leveraged bearish positions last month due to concerns about potential FTX creditor selling. These traders face the risk of exchanges forcing them into liquidation if the market moves against their positions, potentially resulting in a margin shortfall.

The possibility of forced short liquidation is adding upward pressure on SOL’s price, leading to a rally driven by a short squeeze. The most significant near-term risk is now a positive one: the covering of short positions in altcoins could lead to leveraged liquidations that boost the entire cryptocurrency market. SOL is a cryptocurrency to watch in this context.

VanEck launched  an official Ether futures ETF, leading to expectations of increased demand in the cryptocurrency markets. Analysts predicted a 90% chance of the ETF approval in the first week of October.

The SEC may no longer utilise justifications and continue to refuse to approve ETFs on spot Bitcoin, according to the US Court of Appeals’ decision, which found Grayscale to be in the right and the SEC to be in the wrong.

Because of this, a lot of people now consider approval to be quite likely, and the market is responding accordingly.

BlackRock has an ETF approval rate of more than 99%, so when news of its request in this respect broke, the price of BTC also increased past $31,500.

September Historically a Bad Month for Bitcoin and Ethereum

The Federal Reserve employs interest rate increases to slow economic activity when consumer prices are high, but they can also lower the prices of investments like stocks and cryptocurrencies. As a result, financial assets as a whole have struggled.

The stock market often had a terrible month in September. According to statistics , the S&P 500 has fallen a median of 0.42% in September since 1928 and has experienced gains just 44.7% of the time.

Over the past five years, Bitcoin  has experienced an average monthly price decline of 8.5% in September, contrasting with increases of 7.9% in November and 11.1% in December, along with an average gain of 24.6% in October. Bitcoin’s price has increased from the start to the end of September only 28.6% of the time since October 2014, with an average decline of 4.82%.

Similarly, Ether has seen an average 8.5% price decline in September over the past three years, followed by an average 17.5% increase in October. Since November 2017, Ether’s price has been higher from the start to the end of September only 25% of the time, with an average loss of 10.8%.

Ether’s monthly performance, according to data , has been worse in June than in September, with the price falling an average of 15% in that month.

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