After months of crabbing at $16k, Bitcoin underwent a meteoric transformation, surging to as high as $23k in recent times. Of course, the only real answer to my question-title is “No one exactly knows why”, but what fun would life be if we don’t allow ourselves to make wild conjectures and postulate various possibilities? 

If you have heard of Jim Cramer, you might have known of his exhortation for investors to sell their crypto holdings. Thing is, he is somewhat treated as a joke by many people - to the extent that there is an Inverse Cramer ETF website built in his notoriety. So, apparently, Creamer’s warning to ditch crypto was the buy signal that many investors needed, which led to the pump in Bitcoin.

Comic relief aside, one reason that could lead to the rise in Bitcoin is that inflation has slowed down. December inflation data from the United States revealed a slight dip in the core inflation rate - from 6% in November to 5.7% in December. The market responded enthusiastically to this development, probably relieved that the worst of inflation was over (for now). Guess all the raising of interest rates finally yielded positive results.

Another reason could be the catastrophic failure of many exchanges acting as an impetus for people to get their Bitcoin off exchanges and into cold wallets. Sales of Ledger and Trezor have soared like no other. This might have led to a supply shock, thus resulting in more buyers being willing to purchase Bitcoin at a higher price. 

Yet another probable reason is that some good news have surfaced from FTX. It has recovered $5 billion in cash and crypto that it can 
sell to repay its investors. This gave Bitcoin the much-needed dopamine to recover from FTX’s fallout! 

All these factors converged to force short sellers to buy back their short positions, thus causing the pump. More people opened short positions and became obliterated unwittingly because retail investors who had been watching the pump from the sidelines jumped on the bandwagon and FOMO-ed in. This is a reason mentioned by Dr. Julian Hosp, the CEO of Cake DeFi in his weekly newsletter. 

Whatever the reason is, it’s great that BTC is pumping, thus affording some hopium for us struggling investors. If nothing else, I had fun writing this article. May this pump last long enough for you and me to profit from it!