Bitcoin Price Rally Spurs Speculation of Bull Market

Overview

The recent surge in Bitcoin's price has sparked speculation among market participants that the long-awaited bull market has finally arrived. As Bitcoin experienced a 16.1% rally between Oct. 22 and Oct. 24, bearish traders using futures contracts suffered significant liquidations, totaling $230 million. While there are various theories circulating about what may have triggered the price rally, it is clear that there is renewed optimism in the market.

Bitcoin Open Interest

One notable data point is the increase in Bitcoin's open interest, which reflects the total number of futures contracts in play. During the rally, BTC futures open interest rose from $13.1 billion to $14 billion. This differs from a previous price drop on August 17, when Bitcoin's futures open interest decreased from $12 billion to $11.3 billion. The increase in open interest suggests that the demand for new leveraged positions outweighed the forced closures caused by liquidations.

Theories and Speculation

There are several theories circulating about what may have caused the rally. One theory suggests that market makers had their stop losses "chased," leading to a gamma squeeze. Another theory speculates that Changpeng "CZ" Zhao used BNB as collateral for margin on Venus Protocol, a decentralized finance (DeFi) application, in order to support the price of BNB token.

Influx of Funds

Despite the ongoing speculation surrounding the approval of a spot Bitcoin ETF, there is evidence to support a healthy influx of funds into the market. The recent listing of BlackRock's spot Bitcoin ETF request on the Depository Trust & Clearing Corporation (DTCC) may have contributed to the positive sentiment. Additionally, the Bitcoin futures premium reached its highest level in over a year, indicating increased demand for leveraged long positions.

Assessing Trader Sentiment

To gauge trader sentiment after the surprise rally, it is important to analyze BTC derivatives metrics. The Bitcoin options market can provide valuable insights. Currently, the delta 25% skew suggests a balanced demand between call (buy) and put (sell) options.

Conclusion

While the exact cause of Bitcoin's recent price rally remains uncertain, there is a general sense of optimism among market participants. The increase in open interest and the healthy demand for call options indicate a positive market outlook. However, it is important to approach this information with caution and consider it as general information rather than legal or investment advice.