Why Bitcoin Rose to $90K Today and What to Expect Next

Summary:
A recent analysis from QCP Research has uncovered potential reasons behind Bitcoin's surge to $90,000 earlier this week, as well as what this could signify for the cryptocurrency's future.

Key Takeaways

Bitcoin experienced a significant price rise to $90,330, before pulling back to around $87,000.
The rally during the Asian market session was driven by spot and perpetual accumulation amid low liquidity.
Increased trading activity, especially in call options, suggests strong demand for Bitcoin.
There could be a potential gamma-driven squeeze if Bitcoin surpasses $94,000, enhancing upward price momentum.

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Overview of the Bitcoin Rally

On Monday, Bitcoin saw a remarkable increase, surpassing $90,000 and peaking at $90,330 before dropping back to approximately $87,000. The surge prompted analysis from trading firm QCP Research, which sought to determine the factors behind this rally and its significance.

Spot and Perpetual Accumulation Drives the Rally

QCP's analysis indicates that Bitcoin gained 2.6% during the Asian trading session, a trend reminiscent of market behavior on Boxing Day. During this specific time, Bitcoin rose from $87,200 to $89,500 but lost most of its gains as the U.S. market opened.

This event caught attention since it took place during a holiday period, typically characterized by lower liquidity. Although Bitcoin has since fallen from its previous highs, it may mirror performance seen three days prior. An important point raised by QCP is that the recent $40 million in leveraged long liquidations are not likely the cause of the temporary rally to $90,000. Instead, they attribute this to the accumulation of spot and perpetual Bitcoin trading under the current conditions of weak market liquidity.

Interestingly, there may be a connection to Strategy's buying activities, as Michael Saylor, the executive chairman, hinted at acquiring Bitcoin, culminating in a purchase of 1,229 BTC valued at $108 million.

The Role of Derivatives in the Market Movement

Additionally, QCP highlighted that following the expiration of over $27 billion in BTC and ETH options on Deribit last Friday, funding rates surged to above 30%. This trend indicates that option traders previously on the long side have shifted to a short position, expecting Bitcoin to rise.

These rising call positions compel market participants to buy Bitcoin in its spot market or opt for near-expiry calls, further bolstering Bitcoin accumulation. Data from exchanges confirm active long positions in Bitcoin, including interest in the "BTC-2 JAN 26 94K" call.

Implications for Bitcoin’s Future

QCP notes that ongoing demand for Bitcoin accompanied by spot market buying enhances the chance of a gamma-driven squeeze. If Bitcoin can break above $94,000, it will increase call options' delta, prompting dealers to acquire more Bitcoin and potentially driving prices even higher.

A decrease in put options also contributes to a positive outlook, especially as Bitcoin maintains stability above $86,000, which has lessened interest in lower strike puts. Additionally, with significant capital from last Friday's options expiration remaining inactive, market participants may soon reallocate funds, possibly increasing volatility.

However, QCP cautions that basing Bitcoin's prospects solely on options data may be “premature.” They emphasize the importance of exercising caution, as the crypto market currently lacks a clear trend as the year comes to a close.

Disclaimer: This article is designed to provide information and should not be considered financial advice. The opinions expressed here may reflect the author's views and do not represent The Crypto Basic's opinions. Readers should conduct thorough research before making investment decisions. The Crypto Basic is not liable for any financial losses.