The price of Bitcoin passed $19,000 for the first time since 2017, and a number of indicators suggest the rally could continue.
Why did the price of Bitcoin hit $19,000 for the first time in a three-year market update
Bitcoin hit $19,000 on November 24 for the first time since its historic rally in December 2017. There are three key reasons behind the strength of the dominant cryptocurrency.
The main factors underpinning bitcoin's continued rise are the accumulation of whales, the dwindling supply of foreign exchange and an explosive trend in trading volumes.
Whales are still accumulating bitcoins
Throughout November, Cointelegraph reported that a "whale herd" was steadily forming as bitcoin prices recovered.
These clusters occur when the bitcoin giant buys bitcoins at a certain price point but does not move them. Analysts interpreted this as a sign that the whale population was on the rise and had no intention of selling in the near future.
The difference between Bitcoin's current rally and previous price cycles is that the recent uptrend has proved more sustainable. In fact, each whale cluster indicates that each major support layer of BTC recovery is accompanied by whale aggregation.
When bitcoin hit a low of $17,200 on November 18, analysts at Whalemap said the whale's new support level was $16,410. They said:
"The bubble shows the price at which whales are buying Bitcoin, the amount of bitcoin they currently hold. Bubbles also visualize support levels. The last time we bounced back from $15,762, the price was up 15%. Will the new $16,411 bubble hold this time?"
Since then, it has fallen below $18,000 several times, but has since rebounded to more than $18,800, maintaining its strong momentum.
In addition, data from Santiment, a chain market analysis platform, show a similar trend. Health department researchers have found that the BTC whale population has increased significantly in recent months. They explained:
The number of bitcoin whales with at least 10,000 bitcoins (currently worth more than $185m) has surged to 114 in the past few days as the price of bitcoin soared above $18,000. In addition, there are 2,449 cardholders holding at least 1,000 Bitcoins ($18.5 million)!"
The supply of bitcoin is drying up
A consistent trend throughout the 2020 bull market has been the continued decline in bitcoin foreign exchange reserves.
When investors and whales want to sell bitcoin, they put it on an exchange. So the recent decline in reserves means there are fewer sellers in the market.
A trader named Byzantine General, who spoke on condition of anonymity, said that each time physical exchanges pretended to accumulate bitcoin reserves, the currency needed to be further developed. He said:
"Every time a spot exchange increases its bitcoin reserves, they run out almost immediately," he said. Don't you get it? There is simply not enough supply."
Volume surged
Trading volumes on institutional and spot exchanges have been growing rapidly since September. In November, open interest in CME bitcoin futures and options exceeded $1 billion, and Binance's BTC/USDT trading volume continued to exceed $1.5 billion per day.
Data also suggest that the spot market, rather than derivatives or futures, is leading the rebound. This trend has made the rally more stable and reduced the risk of a major correction.
In a bitcoin uptrend, when futures market volumes dominate, there is a significant risk of cascading clearing. This time, the spot market has been leading the rally, making it more sustainable.