The two largest cryptocurrencies in the world, bitcoin and ethereum, reached new levels of appreciation this Monday, February 26, 2024, driven by demand from institutional investors and the liquidation of short positions.
Bitcoin ($BTC ), the first and most popular digital currency, rose 4.60%, to US$54,357.98 (R$270,784.30), the highest level since November 2023, according to data from Binance broker. Ethereum, the second largest cryptocurrency by market capitalization, advanced 1.73%, to US$3,167.95 (R$15,781.14.10), the highest value in its history.
One of the factors that drove bitcoin's rise was the approval of the first spot bitcoin index funds (ETFs) in the United States, which allow investors to buy and sell shares representing the digital currency without needing their own wallet. Spot bitcoin ETFs are different from futures ETFs, which already existed in the US and which trade currency futures contracts.
Spot bitcoin ETFs were approved by the US Securities and Exchange Commission (SEC) in early February, after years of failed attempts by several companies. The first ETFs to be launched were the Bitwise Bitcoin ETF (BITO) and the Valkyrie Bitcoin ETF (BTFD), which began trading on the New York Stock Exchange (NYSE) on February 15. Since then, other spot bitcoin ETFs have also been launched, such as the VanEck Bitcoin ETF (XBTF) and the Purpose Bitcoin ETF (BTCC).
Spot bitcoin ETFs attracted the attention of institutional investors, who saw them as an easier, safer and more regulated way to access the cryptocurrency market. According to data from analytics firm CryptoCompare, spot bitcoin ETFs moved more than $1 billion in trading volume in the first ten days of operation, outperforming bitcoin futures ETFs.
Another factor that contributed to the rise in bitcoin was the liquidation of short positions in the currency, which occurred at the end of last week. Short positions, or short positions, are those in which investors bet on a fall in the price of an asset, selling it now to buy it cheaper in the future. However, when the asset's price rises, short investors need to buy the asset back to avoid further losses, generating buying pressure that increases the price even further. This phenomenon is called a short squeeze.
According to data from analysis firm Bybt, more than US$1.2 billion in short positions in bitcoin were liquidated between Friday and Sunday, which drove the currency's price upwards. Most of the liquidations occurred on the BitMEX brokerage, which had more than US$500 million in bitcoin short positions closed during the period.
Ethereum ($ETH ), in turn, also benefited from the increase in demand for cryptocurrencies and the appreciation of bitcoin, which tends to pull the market as a whole. Furthermore, ethereum has also had its own bullish factors, such as the release of the EIP-1559 update in August 2023, which made the network's fee system more efficient and reduced the coin's supply, and the advancement of the Ethereum 2.0 project , which aims to make the network faster, safer and more sustainable.
With this Monday's rise, bitcoin and ethereum expanded their advantages over other cryptocurrencies. According to data from the CoinMarketCap website, bitcoin has a market capitalization of US$1.02 trillion, which represents 42.5% of the total cryptocurrency market, which is worth US$2.4 trillion. Ethereum has a market capitalization of US$369 billion, which represents 15.4% of the total market. The third largest cryptocurrency by market capitalization is Binance (BNB), which is worth $66 billion, or 2.7% of the total market.
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