Bitcoin Hits 2024 High Before Dramatic Sell-Off

Bitcoin's price experienced a significant surge, reaching a new high for 2024 at $53,019 on February 20th, only to face a sharp sell-off, plummeting to $50,000 on some exchanges.

by Faruk Imamovic
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Bitcoin Hits 2024 High Before Dramatic Sell-Off
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Bitcoin's price experienced a significant surge, reaching a new high for 2024 at $53,019 on February 20th, only to face a sharp sell-off, plummeting to $50,000 on some exchanges. This volatility has caught the attention of traders and investors alike, with many pointing to the influx of spot Bitcoin ETF (Exchange-Traded Fund) inflows and the anticipation of the upcoming supply halving event as key drivers behind these price movements.

Currently, Bitcoin trades above $52,100, leaving the market in suspense over its next direction.

Futures Open Interest Peaks Amidst Rising Prices

One notable aspect of Bitcoin's recent market activity is the significant increase in futures open interest, reaching a 26-month high.

This metric, which represents the total value of outstanding Bitcoin futures contracts, has surged to $22.69 billion, closely approaching the $23 billion peak recorded in November 2021. This uptick in open interest reflects heightened trading activity and investor sentiment around Bitcoin, aligning with its 23% year-to-date rally.

The growth in futures open interest and the bullish market sentiment are partly attributed to the consistent inflows into spot Bitcoin ETFs. Following the U.S. Securities and Exchange Commission's approval of spot Bitcoin ETFs on January 10th, Bitcoin quickly surpassed its previous $49,000 high.

According to data from Farside Investors, Bitcoin ETFs have seen $4.91 billion in inflows in the six weeks since trading commenced on January 11th, with the total weekly inflows hitting $2.5 billion last week alone.

The Anticipated Bitcoin Halving Effect

Another critical factor contributing to the current market dynamics is the upcoming Bitcoin halving event.

Expected to occur in the near future, this event will halve the rewards given to miners, potentially reducing the rate at which new Bitcoins are created. Historically, halving events have preceded significant price uptrends for Bitcoin, and many investors are betting on this pattern repeating.

Amidst this backdrop of optimism and strategic positioning, Bitcoin traders are closely monitoring the market for the next major move. According to IntoTheBlock's In/Out of the Money Around Price (IOMAP) model, a considerable amount of Bitcoin was acquired at an average cost of $52,081.

This price level is now seen as a critical resistance point, with traders poised to defend the support zone between $52,000 and $51,700. The outcome of this battle will likely dictate Bitcoin's short-term trajectory.

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