Bitcoin reclaimed the coveted $100,000 valuation on Thursday, lifting its market capitalization to above $2 trillion for the first time since January. While the number has steadied above the $2 trillion mark, analysts predict record highs on the back of an impending US inflation data due on Tuesday, May 13.
Blockchain analytics firm Gassnode noted that this rise in valuation has attracted a wave of new buyers to the market. While it is common for new investors to pitch in during bullish conditions, they are doing so in large numbers, indicating at retail FOMO – Fear of Missing Out.
FOMO occurs when investors feel compelled to buy coins because they see others profiting from them or fear that the price will increase significantly, putting it out of their reach. It causes many investors to make impulsive purchases driven by emotions rather than careful research.
Bitcoin Rally Attracts New Buyers, But Market Veterans See Possible Price Correction
Glassnode analysts said in an X post that BTC Supply Mapping is currently showing sustained strength in newfound demand, and First-Time Buyers RSI has held at 100 throughout the week, indicating strong buying interest from new market participants.
The BTC supply-mapping tool represents the classification of different investor cohorts based on their behavioral patterns. First-time buyers are the wallets engaging with a specific cryptocurrency for the first time.
Despite rising interest in Bitcoin from new investors, seasoned traders are taking a more cautious approach as they see the possibility of a price consolidation or pullback. As per Glassnode, demand from momentum buyers – traders capitalizing on an established uptrend or downtrend, betting it will continue – remains weak, with the 30-day RSI sitting at 11. The analytics firm noted that weakened momentum buying and rising profit-taking could lead to a price consolidation as fresh inflows slow and follow-through on the trend lags.
A sharp pullback late on Monday triggered over $530 million in long liquidations, erasing gains made over the weekend as traders reacted to the de-escalating US-China trade tensions. CoinGlass data showed that of the liquidations, nearly $200 million came from Bitcoin futures and $170 million stemmed from Ether (ETH) products.
Liquidations occur when an exchange is forced to close a trader’s leveraged position due to insufficient margin. It happens when a trader fails to meet the margin requirement for a leveraged position because they don’t have sufficient funds to keep the trade open.
The liquidations were a hefty reversal from last week’s euphoric rally, which saw ETH rise 40%, with major altcoins pushing double-digit gains in a wave of short squeezes. That momentum triggered over $1 billion in short liquidations – the highest since 2021, sending Bitcoin briefly past the $104,000 mark before reversing.
Improving US-China Relations and Positive CPI Numbers Could Propel BTC to New All-Time High
Markets turned lower on Monday after reports emerged of a temporary tariff truce between the US and China. Both sides have agreed to remove several mutual levies and pledged renewed trade cooperation. Easing trade tensions have been a boost for the equities market, but they may have triggered the risk-on narrative that fueled crypto price breakouts over the past week.
Data sourced by Coinglass showed that futures open interest across major crypto exchanges dropped by more than $1.2 billion, pointing to a sharp deleveraging as traders with long positions were forced to exit the market.
Jeff Mei, COO at crypto exchange BTSE, noted that currently, macro concerns are driving the market, with eyes on the Federal Reserve’s next meeting in June, which will be the key factor in driving Bitcoin past its previous all-time high. He added that such a scenario would stimulate lending and investment in the US economy, thereby driving growth, and helping avoid the recession narrative investors are worried about.
Bitcoin’s price hit an intraday high of $105,800 on May 12, before declining by 3% to $101,400 later during the trading session. On-chain analytics platform Alphractal noted that the flagship cryptocurrency re-testing its price near the $106,000 resistance level has increased the likelihood of profit-taking by traders. The company’s CEO, João Wedson, pointed out on the price chart that BTC is approaching the “Alpha Price” zone, where long-term holders or whales are poised to take profits.
Another risk is if the price drops to $100,000, resulting in a long squeeze that would liquidate over $3.4 billion in leveraged long positions. However, this range could act as a support for the price, leading to a retest near the psychological level.
The ongoing price correction could be driven by traders de-risking ahead of the release of the US Consumer Price Index (CPI) on May 13. The CPI for March, released on April 10, was 2.4%, lower than the expected 2.5% and down from the 2.8% in February. For April, the forecast remains at 2.4% as energy prices have steadied and there is moderate wage growth, significantly easing pressure on price increases.
A lower-than-expected CPI could be bullish for Bitcoin and a signal for the Fed to cut interest rates this year. This will be a boost to risk assets like equities and cryptocurrencies. Conversely, a higher-than-expected CPI number could be bearish, raising inflation fears and strengthening the dollar, but piling more pressure on BTC.
At the time of writing, Bitcoin (BTC) is trading at $103,177 – down 1.21% in the last 24 hours.