Bitcoin reached $86,000, its highest price in eight months, with the liquidation of short positions and renewed inflows into exchange-traded funds cited as drivers of the rise.
Previously, the $82,000 level had acted as a key resistance since August, preventing Bitcoin from rising further.
Bitcoin’s break above this resistance level triggered a broad wave of short liquidations, with data from the CoinGlass platform showing about $750 million of short positions in the crypto derivatives market were liquidated as Bitcoin passed $82,000.
Buy orders created during the closing of these positions helped push the price higher.
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Jim Fraiolo, head of digital asset research at Charles Schwab, said Bitcoin’s 5 percent rise in the early trading hours was driven by short liquidations in perpetual futures contracts.
At the same time, the use of leveraged trading is rapidly increasing. Data from the CoinAlize platform shows open interest in Bitcoin futures has risen faster than the price of the cryptocurrency, and about $2 billion of new leveraged positions were created after the price broke the resistance level.
Inflows into U.S. Bitcoin exchange-traded funds also increased again. These funds recorded total outflows of $746 million after the U.S. Senate failed to advance a preliminary vote on the Clarity Act and the Federal Reserve’s rate hikes affected market sentiment. However, fund flows last Thursday were $160 million and on Friday net inflows reached $433 million.
The recent rise also pushed Bitcoin above $82,225, the average cost basis of investors in U.S. Bitcoin ETFs. Thus, the average investment in these funds returned to profit territory.
Market attention is now focused on the $90,000 level. Nikolai Sandergard, senior research analyst at Nansen, identified $87,000 as the first important price level and $90,000 and around $92,000 as the next key areas. Jasper Demare, an over-the-counter trader at Wintermute, also raised the possibility of Bitcoin moving toward $90,000.
According to a report by BloomingBit, however, the continuation of this uptrend may require sustained spot demand. Sandergard said that for the rally to continue, buying in the spot market and inflows into ETFs must persist. If leverage keeps rising but spot demand does not grow accordingly, rising U.S. Treasury yields or a geopolitical shock could reverse the uptrend.