The recent price action of Bitcoin has caught the attention of many, leading them to believe that the long-awaited bull market has finally begun. Over the course of three days, Bitcoin’s price surged by 16.1%, resulting in the liquidation of $230 million worth of bearish futures contracts. Interestingly, the increase in Bitcoin’s open interest suggests that shorts were taken by surprise, but not using excessive leverage.
During this rally, Bitcoin futures open interest increased from $13.1 billion to $14 billion, indicating a growing demand for new leveraged positions. This contradicts the idea of a short squeeze and supports the theory of a gamma squeeze, where market makers had their stop losses “chased.” However, it is still uncertain who or what triggered this sudden price rally and whether there was any manipulation involved.
One theory suggests that Changpeng Zhao, the CEO of Binance, used BNB as collateral for margin on Venus Protocol, a DeFi application. This theory proposes that CZ sold Bitcoin to boost the price of BNB and then repurchased Bitcoin using BNB to rebalance his position. While it is difficult to confirm this speculation, it is worth noting that the BNB supply on the platform is substantial enough to create a significant long position using leverage.
In addition to these theories, the BTC derivatives market provides insights into the current sentiment of professional traders. The Bitcoin futures premium reached its highest level in over a year, indicating a shift from bearish sentiment to a more optimistic outlook. Similarly, the options market showed extreme optimism before the rally but has now balanced out.
Overall, despite the ongoing speculation surrounding the approval of a spot Bitcoin ETF, there are indications of a healthy influx of funds supporting a further rally beyond the $35,000 mark. As always, this information should not be taken as legal or investment advice, and the author’s views do not necessarily reflect those of Cointelegraph.