Here's Why Bitcoin Rebounded Nicely Before Thanksgiving
Key Points
Market sentiment is back to driving positive price action for the world's largest cryptocurrency.
Improving sentiment among a number of top risk asset classes appears to be strengthening.
Here's what to make of today's move in Bitcoin, and where this token could be headed from here.
- 10 stocks we like better than Bitcoin ›
Sitting around the Thanksgiving table this week, I'd imagine plenty of folks will be talking Bitcoin (CRYPTO: BTC).
In such discussions, price level (and recent price action) can easily be the topic du jour. There's good reason for this, considering Bitcoin's relative volatility compared to other assets valued at the trillion-dollar level or above.
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Today's 4% move higher in Bitcoin over the past 24 hours (as of 4:30 p.m. ET) does bode well for bulls in their defense of this top cryptocurrency over the next few days. Let's dive into what's driving this move in Bitcoin, and what this recent rally may mean as investors model out their potential returns for the year with their Bitcoin holdings.
Bitcoin bulls thankful for market correlation
Source: Getty Images.
There's usually some sort of significant catalyst at play when it comes to Bitcoin's daily price movements. I have seen some commentary circulating, suggesting that call options and long derivative purchases are increasing. However, the liquidation data for Bitcoin over the past 24 hours has been muted compared to many of the down days we've seen for this top digital asset in recent weeks.
Now, short liquidations have outpaced long liquidations by a 5-to-1 ratio over the past day, so it's clear that investors who have taken the bearish side of the bet on Bitcoin are starting to see their positions unwind. A further unwinding of these bearish bets, in combination with a surge of capital flows into spot Bitcoin ETFs and other funds that directly invest in this top token, could drive much more rapid price appreciation than what is seen in different assets such as equities.
Indeed, it's this higher-beta correlation with the Nasdaq and other high-growth stocks that makes Bitcoin an attractive option for short- and long-term investors, traders, and speculators seeking to predict the market's next direction.
I'm uncertain about which direction Bitcoin will take over the next month or so. But rest assured that whichever direction Bitcoin goes from here, it will likely do so in marvelous fashion.
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Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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