Bitcoin experienced a brief bull run above $10,000 on Wednesday.
The cryptocurrency dipped back below $10,000 due to $14 million worth of shorts liquidations on BitMEX.
Nevertheless, BTC/USD retained its upside target towards $10,000 as the Federal Reserve’s commitment to keeping interest rates near zero until 2022 drove the U.S. dollar to its three-month lows.
Bitcoin visited its medium-term resistance level near $10,000 briefly on Wednesday only to crash later by circa $300.
The immediate correction appeared after BitMEX, a controversial crypto derivative platform, reported short liquidation worth nearly $14 million. The downside move indicated that a lot of bearish traders didn’t expect bitcoin to breach the $10,000 level. That led them to close their short positions forcibly.
Bitcoin sees sharp rise and fall, as $15 million gets liquidated at BitMEX | Source: CryptoWatch
The cryptocurrency immediately fell to $9,690 fifteen minutes after the short liquidation. It recovered back above $9,900 in the early Thursday session.
What Caused the Bitcoin Price Rally?
Bitcoin’s move above $10,000 came after the Federal Reserve’s commitment to maintain interest rates near zero until 20202 and to continue buying Treasury and mortgage-backed securities.
“We’re not thinking about raising rates — we’re not even thinking about thinking about raising rates,” said Fed Chairman Jerome Powell in a press brief on Wednesday.
Spot traders perceived the central bank’s expansionary policy as their cue to buy Bitcoin. The sentiment also drew inspirations from the S&P 500, which rose briefly but later turned choppier. The U.S. benchmark and Bitcoin have lately developed an erratic positive correlation.
BTCUSD and S&P 500 reacted similarly to the Fed’s announcement | Source: TradingView.com
Bitcoin’s rally also surfaced as the U.S. dollar sank to its three-month lows against a basket of foreign currencies. Investors offloaded their cash-positions for risky alternatives, which may have ended up benefitting the top cryptocurrency. Traders see a falling dollar as a sign of strengthening bitcoin.
“I hope [the prediction of a crash in the U.S. dollar] is wrong,” noted Mike Belshe, the CEO of BitGo. “But if you think it might be right, you should allocate 2% of your net worth into Bitcoin now.”
Prominent market analyst Mohit Sorout stressed that bitcoin’s correction below $9,700 didn’t mature because there is still a huge buying interest for the cryptocurrency.
The trader highlighted that traders are not crashing Bitcoin below its June’s opening rate near $9,445. He further recalled a similar pullback behavior near the May’s monthly open at $8,622. The buying sentiment near both the levels looked stronger than usual.
Evidence of buyers interest near June’s monthly open | Source: Mohit Sorout
“This level got front run on recent dumps,” said Mr. Sorout. “Sellers just don’t have what it takes to push price down. Longed.”
Bitcoin was trading at $9,884 at the time of this publication.
Source: Bitcoin Set to Break ,000 as Dollar Dips to Three-Month Lows