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Trading firms and cryptocurrency enthusiasts have been buzzing with activity as Bitcoin’s resurgence has stirred up the market, rekindling hopes of a major bull run.

With Bitcoin’s current price listed at $34,136 according to CoinGecko at the time of writing, the cryptocurrency has gained 0.8% over the past 24 hours and a significant 19% in the last seven days, marking a notable upswing not seen in months. BTC hit the vaunted $35K mark Tuesday, to the delight of traders and enthusiasts alike.

Amidst this fervor, market experts are pointing towards a potential interplay between derivative trades and the recent spike in the top crypto’s value.

Spencer Hallarn, global head of OTC trading at GSR, in a Blockworks report highlighted the mounting speculation regarding the approval of a US spot Bitcoin ETF, triggering a short squeeze in derivative positions. 

Derivative Trades Unwind: Bitcoin Short Squeeze

This phenomenon has led to the unwinding of short positions, subsequently pushing the price of Bitcoin even higher. The unfolding dynamics have compelled some significant moves within the industry, as evidenced by Deribit’s decision to raise margin requirements to cushion against abrupt price swings and volatility surges. 

Such measures are being adopted to safeguard traders from potential liquidity issues that could arise from rapid and unpredictable market fluctuations. However, the impact of these adjustments on the broader market remains to be seen.

Furthermore, recent events, including the temporary listing of BlackRock’s iShares Bitcoin Trust on the DTCC’s website, have kindled fervent speculation about the imminent approval of a spot Bitcoin ETF by the Securities and Exchange Commission (SEC).

Although the listing has since been removed, it has set the stage for heightened anticipation among investors and enthusiasts, indicating a growing mainstream interest in cryptocurrencies.

A Digital Safe Haven

Nevertheless, the surge in Bitcoin’s price is not solely attributable to market mechanics and speculation. A prevailing sense of apprehension and uncertainty in traditional investment avenues has nudged investors towards alternative assets, with the king crypto emerging as a digital safe haven of sorts.

In the face of economic ambiguity and global turbulence, Bitcoin’s moniker as ‘digital gold’ has gained traction, enticing investors to diversify their portfolios beyond conventional stocks and bonds.

However, despite the recent rally, concerns linger about the sustainability and longevity of Bitcoin’s upward trajectory. While the surge might be bolstered by short-term factors and market speculation, long-term stability remains a lingering question.

Moreover, the market’s sensitivity to regulatory decisions, as evidenced by the response to the potential Bitcoin ETF approval, highlights the significance of policy changes in shaping the cryptocurrency landscape.

Whether Bitcoin’s current surge is a fleeting spark or a herald of a broader transformation in the financial landscape remains a topic of intense debate and speculation among market participants and analysts alike.

Featured image from ZDNet