Bitcoin’s bull market pullbacks have been elusive during the recent price surge

During Bitcoin’s recent price surge, it has become evident that the expected bull market pullbacks have been notably elusive. This current bull run is more characterized by a stair-step price action, featuring a series of gains and horizontal consolidations. The rally has been able to limit its downside, thanks to a spot-led market and low leverage. Remarkably, over half of Bitcoin’s surge this year alone has taken place within just the past eight weeks. What sets this rally apart from previous ones is the absence of significant pullbacks, with declines of 20% or more not materializing. At the heart of this bull market are spot market buyers, who have been actively driving the price increase. This increased activity in the spot and derivatives trading on centralized exchanges, coupled with lower leverage offered by leading exchanges, supports the gradual upward trajectory of Bitcoin’s price. Moreover, the use of stablecoin-margined contracts and cash as margin for trading has become more prevalent, thereby minimizing liquidation risk. With a low estimated leverage ratio and growing institutional involvement, the upcoming passage of the ETF further bolsters the current bull market. All things considered, it is safe to conclude that this bull market remains healthy, with limited downside potential.

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Characteristics of Bitcoin’s current bull run

Stair-step price action

During the current bull run, Bitcoin’s price action has been characterized by a stair-step pattern. This means that the price has been steadily increasing with a series of upward movements followed by periods of consolidation. This gradual ascent is indicative of a strong and sustainable upward trend.

Series of price gains and horizontal consolidations

Unlike previous bull runs, the current rally has seen a series of price gains followed by horizontal consolidations. This means that after a significant price increase, the price has temporarily stabilized before continuing its upward trajectory. This pattern suggests a healthier and more sustainable market growth compared to sharp and sudden spikes in price.

Limited downside due to spot-led market and low leverage

One of the factors contributing to the limited downside in Bitcoin’s current bull run is the spot-led market. The spot market is where investors buy and sell actual digital assets, rather than trading them through derivative products. This has created a more stable foundation for the market, reducing the risk of volatility and excessive price swings.

Furthermore, the current bull run has lower levels of leverage compared to previous rallies. Leverage refers to the use of borrowed funds to amplify potential returns. With lower leverage, there is less risk of liquidation and sudden market downturns. This decrease in leverage has contributed to the overall stability of the market.

Over half of surge in past eight weeks

A significant feature of the current bull run is that over half of Bitcoin’s surge has occurred in the past eight weeks. This rapid increase in price within a relatively short time frame indicates a strong momentum and investor confidence in the market. It also reflects the growing adoption and recognition of Bitcoin as a viable investment.

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Difference in pullbacks compared to past rallies

No significant pullbacks of 20% or more

Unlike past bull runs, the current rally has not experienced any significant pullbacks of 20% or more. Pullbacks refer to temporary decreases in price after a significant upward movement. The absence of such substantial pullbacks in the current market suggests a more balanced and sustainable growth trajectory.

Spot market buyers driving bull market

Spot market buyers, who purchase actual Bitcoin as opposed to trading derivatives, have been the primary drivers of the current bull market. This indicates a strong demand for the digital asset from investors who believe in the long-term potential of Bitcoin. The involvement of spot market buyers adds credibility to the rally and supports the notion of a healthily growing market.

Increased volume of spot and derivatives trading on centralized exchanges

Centralized exchanges have witnessed an increase in both spot and derivatives trading volume during the current bull run. This rise in trading activity suggests heightened investor participation and interest in Bitcoin as an investment asset. It also indicates a maturing market infrastructure that can handle increased transaction volumes and liquidity.

Low degree of leverage supporting gradual price increase

The current bull run is characterized by a low degree of leverage in the system. Lower leverage levels contribute to a more gradual and sustainable increase in price, reducing the risk of sudden market collapses. This reflects a more cautious approach from investors and a focus on long-term value appreciation rather than speculative trading.

Leading exchanges offering lower leverage than previous bull runs

Unlike previous bull runs, leading cryptocurrency exchanges are offering lower leverage options to traders. This shift towards lower leverage ratios reduces the overall risk in the market and encourages responsible trading practices. By limiting the amount of borrowed funds, the market becomes less vulnerable to excessive liquidations and rapid price declines.

Activity concentrated in standard futures on regulated exchanges

The current bull market has seen a concentration of trading activity in standard futures contracts on regulated exchanges. These regulated exchanges, such as the Chicago Mercantile Exchange (CME), provide a secure and transparent trading environment for institutional and professional investors. The focus on these regulated platforms adds legitimacy and stability to the market.

Increased use of stablecoin-margined contracts and cash as margin

Another notable difference in the current bull run is the increased use of stablecoin-margined contracts and cash as margin for trading. Stablecoins are cryptocurrencies that are pegged to a stable asset such as the US dollar, offering a more stable value compared to other cryptocurrencies. This use of stablecoins as collateral reduces the risk of liquidations, as stablecoins provide more stability during periods of volatility.

By utilizing cash as margin, traders have a cushion of funds readily available to cover potential losses. This approach reduces the risk of excessive leverage and mitigates the impact of sudden price fluctuations, thereby contributing to a more stable and manageable market.

Low leverage ratio and reduced liquidation risk

Bitcoin’s estimated leverage ratio remains low compared to previous highs, contributing to reduced liquidation risk. The leverage ratio refers to the amount of borrowed funds used in trading compared to the trader’s own capital. A low leverage ratio indicates a more conservative approach to trading and reduces the potential for forced liquidations during market downturns. This decreased liquidation risk ensures a more stable market environment and prevents sudden downward spirals.

Factors supporting the current bull market

Impending passage of ETF

One of the key factors supporting the current bull market is the anticipation and potential passage of an Exchange-Traded Fund (ETF) for Bitcoin. An ETF would allow investors to gain exposure to Bitcoin without directly owning the digital asset, making it easier for traditional investors to participate in this emerging market. The approval of a Bitcoin ETF would validate Bitcoin as an investment asset class and could significantly increase institutional and retail investor interest in the market.

Increased institutional involvement

The current bull run has seen a notable increase in institutional involvement in the Bitcoin market. Established financial institutions, such as banks and asset management firms, are increasingly recognizing the potential of Bitcoin as a store of value and a viable investment asset. Institutional investors bring credibility and capital to the market, adding stability and contributing to the overall growth of the bull market.

Healthy overall market with limited downside

Overall, the current bull market in Bitcoin is considered healthy, with limited downside risks. The market has seen gradual and sustainable price increases, driven by spot market buyers and supported by lower levels of leverage. The increased trading volume on centralized exchanges and the use of stablecoin-margined contracts and cash as margin further contribute to stability and reduced volatility.

While pullbacks have been limited in magnitude, they are expected as a natural part of market cycles. However, the absence of significant pullbacks of 20% or more suggests a more stable and resilient market. With the impending passage of an ETF and increased institutional involvement, the current bull market in Bitcoin is well-positioned for continued growth and potential long-term success.

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