As hard as it is to believe now, only a few weeks ago the depression in the Bitcoin market was real. We had a full year of seeing nothing but the price continuing to drop. A summer of crypto business insolvencies all capped off by perhaps the biggest fraud in crypto history. The collapse of FTX. All of this sent the price of Bitcoin lower than we ever thought we’d see again. Dropping all the way down to $15k. Breaking the sacred theory that Bitcoin would never drop below its previous cycle's all-time high. We learned the hard way that anything could happen and probably will happen.
While Bitcoin’s perception in the mainstream market is always touch and go. However, this time felt different. SBF was the golden boy in the US when it came to crypto and had his money nearly everywhere. Politicians, hedge funds, and highly respectable businesses. This fraud really tarnished crypto’s image, unlike anything we’ve seen for quite a lot time. This led many to wonder if Bitcoin or crypto would ever be able to recover from this. Was it destined to slowly wither away and trend to zero as so many pundits have claimed over the years?
Just as Bitcoin seemed to be at its lowest point, that was the exact moment that the price bounced and began soaring once again. Rising from $15k all the way to $25k in just a handful of weeks. Enthusiasm has returned to the market and there is even hope for a potential bull run leading into the next Bitcoin halving.
But why did the market suddenly flip bullish?
The correct answer was that it wasn’t a single thing, but a combination of several factors. One of the most notable was leverage in the market. “We live by the sword, and die by the sword.” Last year it seemed that leverage in the market was contributing to our own downfall. While the business insolvencies were bad enough, the real reason the price dropped to such a significant degree was due to the cascade of leverage liquidations that took place. Once the price snowball began rolling down the mountain, it picked up much more speed and power, which led to prices dropping at unprecedented speed.
However, this time leverage was our friend. As I mentioned before, the mood of the market was that it was on the brink of death. It makes sense then that most people were placing short trades predicting the market to drop even further. This fact, in combination that the FED beginning to become more dovish in their interest rate hikes, caused the price of Bitcoin to go up. As it was rising, shorter traders were liquidated causing the prices to go even further.
Bitcoin becoming bullish couldn’t have happened without one major thing happening. The fact is that the market ran out of sellers. The people who were still in the market were those who had real conviction in Bitcoin and refused to sell at such low price levels. That is why Bitcoin’s price hit a brick wall at the $15k level. Nobody was willing to sell and so Bitcoin’s price refused to go any lower.
The fact that there has now been peace in the crypto market since November also cannot be understated. While last year was one that most Bitcoin owners would rather forget. The truth is that after each insolvency or self-induced wound in the market, Bitcoin’s price would recover when there were moments of peace. The problem was that there was an endless amount of these events that kept happening.
While it is too soon to tell if Bitcoin NFTs, Ordinals, will have any effect on its price. There is no denying that it has brought excitement back into the Bitcoin market. Which can only help the price rise.
The Bitcoin market is known for its volatility. While we don’t like it when that volatility goes against us. The fact is that if we want Bitcoin to reach those fabled price predictions. Then heavy volatility is required. Prices won’t always move up in a straight line. There will be fantastic years, but also years we’d rather forget. The longer you are in this industry, you will learn that the mood of the market often flips in an instant. And it looks like we just witnessed that happen. Things are beginning to look brighter once again. The price of Bitcoin is recovering, and we are quickly approaching the next BTC halving that will take place next year. It’s enough to make anyone begin dreaming about where the price of Bitcoin may go next cycle!
How about you? Why do you think Bitcoin flipped bullish!?
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