Market Analysis

5 reasons why Bitcoin price just reclaimed $33,000

Two weeks ago, few investors would have expected Bitcoin (BTC) price to rally any higher than $20,000. In fact, most had forecast a $30,000 BTC price by mid-2022 or late 2023 at best. 

This means that many holders were likely caught by surprise as BTC price surged to $34,800 just 17 days after crossing the $20,000 mark.

Generally, analysts expect a sharp correction to follow Bitcoin’s 150% gain since November, but currently, there are no fundamental indicators that support this point of view.

BTC/USD 4-hour chart. Source: TradingView

Despite the recent bullish euphoria surrouning Bitcoin’s price action, the digital asset faced a significant drop as the price fell by $5,600 in 3 hours. Over $1.2 billion in liquidations followed that red candle, and typically this sort of move would raise alarm and lead analysts to forecast a potential trend reversal.

Each time Bitcoin makes a new high, investors expect some form of correction. Despite failing to break through the $34,500 resistance, the price quickly bounced from its sub- $28,000 dip on Jan. 4. This event might have monetarily spooked some buyers, but looking under the hood, it is a very bullish sign.

During the past week, Bitcoin’s dominance rallied to its highest level since March 2017, reaching 73%. Significant purchasing activity from institutional investors has been tied to the movement, including Grayscale’s addition of 72,950 BTC in December.

Moreover, investments from MicroStrategy, Ruffer Investment, MassMutual, and SkyBridge Capital are further indisputable evidence of the institutional inflow. Thus, BTC is becoming their preferred and almost exclusive investment option among cryptocurrencies.

Bitcoin’s dominance drop triggered a mini altcoin season

Regardless of the moves of professional traders, retail traders have an enormous impact on altcoins. Therefore, the Bitcoin rally created an opportunity for an alt season and DeFi-related tokens appear to be benifitting most.

Top cryptocurrencies weekly performance. Source: Nomics

In the past week, Bitcoin outperformed the top-15 altcoins, which climbed 9% on average. More importantly, the overall volume has skyrocketed, eliminating any doubts about weekends or holiday pumps with low market participation.