The price of bitcoin is once again at a six-week high, and BTC is aiming for $21,000. The cryptocurrency markets are booming for the following three reasons.
After drifting lower for months and spending the previous few weeks in a constrained trading range, BTC/USD has achieved gains of more than 7% during the past 24 hours.
As it approaches its highest levels since mid-September, the biggest cryptocurrency is rewarding investors who refused to sell and punishing shorts to the tune of around $1 billion.
The trend reversal happened abruptly, as the liquidation figure demonstrates, and many people were taken off guard.
Behind the scenes, however, not much has changed; internal Bitcoin issues have not altered, nor have macroeconomic factors significantly changed from one week ago.
The Fed could change its tune on rate hikes
Concerns centred on an unyielding strategy that would keep interest rates rising and the U.S. currency strong for the foreseeable future, which would be the worst-case scenario for risky assets.
However, during the last week, other economies—most notably Japan, which repeatedly intervened in its currency market to support the faltering yen—have felt the effects of that approach.
At the same time, speculation is growing about the likelihood of rate increases as the Fed runs out of options. After the increase next month, there are concerns that the strategy may start to reverse, with successive increases in size being less until a complete change in direction occurs in 2023.
Bitcoin volatility snaps record low levels
It is evident from the analysis of the Cointelegraph Markets Pro and TradingView data that the BTC/USD market has been too calm for too long.
This is particularly apparent in the Bollinger Bands volatility indicator, which in Bitcoin's history has never been closer together and has been urging a breakout for weeks.
This month, Bitcoin volatility even fell below that of some major fiat currencies, making BTC look more like a stablecoin than a risk asset.
Analysts had long expected the trend to undergo a violent change, however; and true to form, crypto markets did not disappoint.
A look at the Bitcoin historical volatility index (BVOL), recently at multiyear lows seen only a handful of times, shows that Bitcoin still has a way to go to abandon this characteristic.
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