Bitcoin prices were driven higher early on Wednesday by buying demand and a reset in funding rates for perpetual contracts, which fueled a recovery in the broader market.
After momentarily hitting record highs, Bitcoin fell more than 7% on Tuesday, losing more than $10K and sparking a sell-off across the entire market, resulting in more than $1 billion in liquidations due to the volatility.
It showed resiliency as it fell as low as $60,800 and then approached $67,000 in the early morning hours of Wednesday.
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Highly rated altcoins like Solana, Cardano, and Ether recovered from yesterday’s losses, increasing by as much as 5% in the last hour due to the strength of the flagship digital asset.
CoinGlass data revealed the correction set off a series of cascading liquidations that eliminated leveraged derivatives positions totaling over $1 billion across all digital assets.
Bitcoin miners selling off some of their Bitcoin holdings and profit-taking at historical highs were probably the main causes of the selling pressure.
Net flows to the top ten U.S. spot bitcoin funds totaled $2.2 billion in the week ending March 1, with over $2 billion invested in BlackRock’s iShares Bitcoin Trust (IBIT), according to LSEG data.
In addition, the $10 trillion asset manager amassed over $760 million on Tuesday, indicating that inflows into spot bitcoin exchange-traded funds (ETFs) remained robust, according to data.
Exchange-traded funds (ETFs) a basket of assets that can be bought and sold on an exchange like shares—that track the price of bitcoin were approved by the US financial regulator in January, which has played a significant role in the rise of bitcoin since the beginning of the year.
Bitcoin’s rise of nearly 160% since October, 44% of which came in February alone stands in stark contrast to 2022, when a series of high-profile corporate bankruptcies and scandals drove the market into an 18-month-long crypto winter.
Despite its recent rise in popularity, many investors still consider bitcoin to be a speculative asset because of its excessive volatility and lack of useful applications.
However, some businesses are adding cryptocurrency to their corporate coffers. In addition to the confluence of money flows into ETFs, the possibility of a limited supply of bitcoin, and a future drop in U.S. interest rates.
Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), reluctantly approved the bitcoin ETFs after a court decision forced his hand, but he is still skeptical about the market. He asserted in a statement announcing the ETFs’ clearance that “Bitcoin is primarily a volatile, speculative asset that is also used for illicit activity, such as money laundering, ransomware, sanction evasion, and financing of terrorism.”
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