The Bitcoin price suddenly made a big jump yesterday. This increase was fairly unexpected, because the market usually adopts a wait-and-see attitude towards interest rate decisions by the US central bank. The next interest rate meeting is scheduled for today. Still, Bitcoin’s price action is already looking quite strong at the moment.
The real breakthrough is yet to come
Although we see in the Satoshi Flipper chart above that Bitcoin has broken out of a symmetrical triangle, the price continues to struggle to stay above $93,000. Yesterday Bitcoin shot above $94,000, and today we see the price trading at $92,600 again.
In that respect, the bulls cannot yet definitively take control. The bears remain strong and will push back once the price heads towards $93,000. Still, the bulls’ steadfastness is interesting, and is a powerful signal that Bitcoin is continuously trying to break out.
For now, however, we have to wait for the US central bank. The interest rate decision itself is not that important. There is almost a 100 percent chance that there will be an interest rate cut. It is more about Chairman Jerome Powell’s press conference and the scenario he outlines for the future.
If he indicates that the weakened labor market is now the central bank’s main concern, then that is in principle a signal for more interest rate cuts. And that’s probably what Bitcoin needs to finally jump over the $93,000 mark.
Why is the Bitcoin price rising?
Since there was no clear fundamental reason for the Bitcoin price increase, it was probably a Short Squeeze. This occurs when the price rises and traders who gamble with borrowed money on a fall in Bitcoin are obliged to buy.
When you go short, you essentially borrow Bitcoin from an exchange platform that you immediately sell. Of course, there is an obligation to buy back that Bitcoin in the future.
However, is the price rising fast? Then your position goes into negative territory, and you have to pay more money to buy back the Bitcoin. If you get to a point where you don’t have enough money in your account to close that gap, you will be liquidated.
At that moment, the system automatically buys back the borrowed Bitcoin with the capital in your account. If that happens to many people at the same time, we call it a Short Squeeze, and the price often shoots up.
Bitcoin usually falls quickly again, because there was no fundamental reason for the increase. In principle, that is also what we see happening now. The price rose to $94,000, but is now back below $93,000.
Source: https://newsbit.nl/crypto-wekker-waarom-knalt-de-bitcoin-koers-3-procent-omhoog/
