Bitcoin volatility back after hitting record price

Bitcoin is rallying back toward all-time highs after its surge to a record on Tuesday was met with massive selling, resulting in the cryptocurrency’s most volatile price action of the year.

The largest and oldest token was up 5.8% to $67,002.84 as of 3:05 p.m. on Wednesday in New York, helping to lift the wider digital-asset market.

A day earlier, Bitcoin touched an all-time peak of $69,191.95 before quickly sinking back below $60,000.

The more-than 14% range between the low and high on Tuesday was its biggest price swing of the year, according to data compiled by Bloomberg.

The sudden retreat from the record triggered massive deleveraging by speculators positioned for more gains in Bitcoin, amplifying the size of the drop.

Still, the underlying bullish narrative survived the tumult as flows into new spot-Bitcoin exchange-traded funds remained robust, with BlackRock’s iShares Bitcoin ETF (ticker IBIT) alone pulling in a record  $788.3 million Tuesday in its 37th consecutive day of inflows.

“With some of the leverage taken out, the path higher has now opened up and we look to a near-term break higher as the uptrend resumes immediately,” according to a research note from crypto trading firm QCP Capital.

Leveraged Bets

In the derivatives market, Coinglass data show that about $818 million worth of bullish crypto wagers and $235 million of bearish bets were liquidated in 24 hours through Wednesday morning.

The combined figure of more than $1 billion is among the highest since the pandemic-era bull run in digital assets, according to Stefan von Haenisch, head of trading at OSL SG Pte in Singapore.

Even with the latest dip, Bitcoin’s almost 58% advance so far in 2024 outstrips global stocks, supporting optimism across the digital-asset market. A gauge of the largest 100 tokens is up about 55% over the same period.

The US Securities and Exchange Commission permitted spot-Bitcoin ETFs in January after its effort to resist them suffered a legal defeat last year.

The move has widened the mass-market accessibility of Bitcoin, helping the crypto sector to turn the page following a bear market in 2022 and a string of subsequent bankruptcies, including the implosion of Sam Bankman-Fried’s FTX exchange. The industry used the term “crypto winter” to describe the turmoil.

ETF Inflows

A steady tide of money has poured into the ETFs issued by heavyweights including BlackRock and Fidelity Investments.

The net inflow of about $8.6 billion is colliding with a looming slowdown in Bitcoin’s supply growth, the so-called halving due in April. One question now is whether the cohort of ETF investors will be unsettled by the latest price oscillations.

“ETFs brought in a diverse investor base, and inflows have been healthy,” said Cici Lu McCalman, founder of blockchain adviser Venn Link Partners.

“Inelastic supply will continue to be solid support for Bitcoin’s scarcity value.”

Bitcoin’s comeback started in early 2023 and has helped to lift the overall market value of digital assets to about $2.6 trillion.

The token’s previous peak was $68,991.85 in November 2021, according to data compiled by Bloomberg, a period when monetary and fiscal stimulus was oiling global markets.

“Many traders may have held onto their long positions through the depths of the crypto winter, and are now finally seeing an opportunity to exit at a profit,” said Caroline Mauron, co-founder of digital-asset derivatives liquidity provider Orbit Markets.

“It is not clear how quickly this can be absorbed by new retail and institutional interest, but we do expect the all-time high and levels further up to be re-tested shortly.”