Why Is Bitcoin Price Up Today?

Bitcoin price continues its upward trend, defying bad news, especially the Commodity Futures Trading Commission (CFTC) filing a lawsuit against Binance. While BTC fell 5% within an hour of the news, the bulls have already erased those losses.

In light of the Binance lawsuit and the hawkish stance of the US Federal Reserve (Fed) at the last FOMC meeting, the Bitcoin price is showing remarkable resilience. Despite the negative news, Bitcoin manages to shake it off relatively quickly, indicating the relative strength of the bulls. In the medium term, this supports the argument for higher BTC prices, with the $28,800 area remaining the key resistance zone.

On Friday, the release of the PCE index (Personal Consumption Expenditure Price Index) in the US is likely to provide a key signal for the market. PCE is the Fed’s preferred gauge of inflation and can provide significant volatility again depending on the data. The reasons for the current Bitcoin price rally are diverse.

Macro Outlook and a Potential Fed Pivot

During the last FOMC meeting, the US central bank published its projections for interest rate policy this year (dot plot) and predicted no interest rate cuts. Over the past week, the Fed has repeatedly stated that it does not expect any interest rate cuts in 2023.

However, the financial markets call this a hoax. As analysts of The Kobeissi Letter Note, analysts see a 50/50 chance of a rate hike of 25 basis points in May. However, futures still call for at least three rate cuts by December 2023.

Bitcoin is known to be a sponge that soaks up loose monetary policy. Consequently, Bitcoin investors seem to be maintaining their bullish stance for now, despite the CFTC lawsuit against Binance.

DXY provides a bullish environment for Bitcoin

Also likely supporting the price at the moment is the continued weakness of the US Dollar Index (DXY). The fall of DXY from 105.94 on March 7th to now only 102.68 undoubtedly provides a tailwind for the Bitcoin price.

Another drop towards the yearly low below 101 is likely to further fuel the Bitcoin price no doubt. Traders should therefore keep an eye on DXY due to the inverse correlation.

Ongoing banking crisis boosts BTC

Also bullish for Bitcoin is the ongoing banking crisis in the US. As NewsBTC reported, more than $2.5 trillion in commercial real estate debt will mature over the next five years, with banks holding 70% of commercial real estate loans. Elon Musk called this the “most serious problem” in the banking system.

Meanwhile, US President Joe Biden admitted yesterday that the US banking crisis “is not over yet”. Smaller banks in particular are still the focus of the crisis.

As the renowned analyst Rany Woodward explained via Twitter Deposits from small banks that are not among the 25 largest banks fell by $125 billion last week, $65 billion of which was accounted for by the largest 25 banks. “NOT good for communities as small community banks must tighten credit availability,” Woodward wrote.

Short liquidations drive Bitcoin higher

On the support side, the bulls were able to parry any selling attempts from the bears yesterday. Bitcoin tested and held the key support for the current momentum at $26,800 in the minor time frames.

On a breakdown, the first bearish target would have been around $25,300. However, the bulls have had the upper hand, leading to large short liquidations in the Bitcoin market – although thin liquidity may have also contributed to the rapid movement.

Thus, a classic short squeeze has propelled BTC explosively to a new five-day high today. According to Coinglass data, about $60 million in shorts were liquidated today in the total crypto market, $27.5 million in Bitcoin. However, it is analyst Skew warning:

BTC Binance Spot Heatmap: Thick Liquidity Between $28K and $30K Needs some significant market buying to come through here.

At press time, the BTC price was at $28,515, with an eye on the $28,800 resistance zone.

Featured image from iStock, chart from TradingView.com