Bitcoin is riding high with a significant price increase, having gained over 3% to surpass $97,000 as of May 7, 2024. The crypto trading space witnessed a remarkable surge, with daily trading volumes rising by 37% to $31.7 billion. As investors and analysts turn their attention to the factors that are driving Bitcoin’s ascent, a closer examination reveals several key catalysts.
Market Influences: The US-China Trade Deal Hopes
One of the primary factors fueling Bitcoin’s rise is optimism regarding potential negotiations in US-China trade relations. Early on May 7, the price briefly touched $97,700, an increase attributed to positive sentiment surrounding trade talks. US Treasury Secretary Scott Bessent indicated plans to meet with representatives from China’s Ministry of Commerce, stating:
“The current tariffs and trade barriers are unsustainable, but we don’t want to decouple.”
This sentiment echoed by China’s commerce ministry, which signaled a willingness to engage in discussions, has heightened risk appetite not just in traditional markets but also within the cryptocurrency sector.
While the current market fervor appears promising, skepticism lingers with Polymarket bettors assigning only a 25% probability to the possibility of reaching a deal by June. Concurrently, the impending Federal Open Market Committee (FOMC) meeting on May 7 adds another layer of complexity as traders anticipate potential adjustments to interest rate policies, with current forecasts indicating a 95.6% likelihood of rates remaining unchanged.
Liquidation Dynamics: A Cautionary Tale for Shorts
The current upward trend in Bitcoin’s price is further amplified by significant liquidations within the derivatives market. Recent data show that over $83.6 million in short Bitcoin positions were liquidated within a 24-hour period, while bearish traders faced considerable losses. This forced selling contributes to upward price momentum, a phenomenon reminiscent of the period from March 23 to 25, when a similar spike in liquidations coincided with a 6% increase in Bitcoin’s value.
The rise in open interest, which increased by 26% in just 30 days, further indicates heightened engagement from traders. As of now, Bitcoin’s open interest stands at $64.4 billion, up from $50.8 billion in early April. This influx of activity reinforces the bullish outlook despite temporary fluctuations.
Technical Analysis: Falling Wedge Pattern and Beyond
From a technical perspective, Bitcoin is in the midst of a bullish breakout from a falling wedge pattern. The cryptocurrency has successfully reclaimed essential support levels, including its yearly open at $93,000 and is currently facing a key resistance barrier at $98,000. Breaking through this level may lead to Bitcoin testing its bullish target of $100,200.
However, caution is warranted as the presence of a bearish divergence from the Relative Strength Index (RSI) could indicate a potential weakening of momentum. A daily close below $93,000 might threaten to bring prices down to the $90,000-$87,000 range.
This market outlook emphasizes that while Bitcoin’s rally may appear strong, the underlying dynamics and external influences warrant careful monitoring. Investors are encouraged to remain vigilant and informed as the volatility inherent in the cryptocurrency market persists.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research before making any decisional moves.
