Following days of market turmoil and adverse price movements, a bitcoin-led market recovery saw the asset class surge above $1 trillion in market capitalisation.
Bitcoin Reclaims $20,000
In lieu of more dreadful sell-offs, Bitcoin increased 9% in a matter of hours on Friday, reaching $21,250 at press time. Not two days ago, the top coin plummeted $1,500 at a mind-numbing pace, hitting a $18,500 before buyers stepped in.
When the European Central Bank (ECB) announced its highest rate hike in history (75 basis points) on Thursday, BTC/USD did not react, however.
Per the ECB’s announcement, the central bank will increase rates to combat inflation and its ever-devaluing status versus the Dollar.
But in the early hours of Friday morning (5:00 CEST), Bitcoin bulls went on the offensive, driving crypto prices on a Northbound trajectory without pause.
Notably, data from SentimentTrader this week highlighted extreme institutional hedging volumes to the tune of $8.1 billion worth of put options, with less that $1 billion in calls.
The traded volume exceeds values seen in 2008 three times over, potentially opening the door for a major macro market reversal in risk assets.
Sometimes, there’s a chart that just blows your hair back.
In 22 years of doing this, none stand out like this one.
Last week, institutional traders bought $8.1 billion worth of put options. They bought less than $1 billion in calls.
This is 3x more extreme than 2008. pic.twitter.com/paqtIFxogE
— SentimenTrader (@sentimentrader) September 7, 2022
This is in contrast to the current expert consensus that the logical end to Central Bank rate hikes should be a larger market crash.
Ethereum Hits $1,700
Alternative coins also performed well, but fell behind Bitcoin in Dollar terms. Ethereum regained traction and hit $1,700 in anticipation of the merge.
At press time, Ethereum remains the second-largest crypto by market cap.
Crypto Rallies Ahead of Stimulus?
This week, a Bloomberg report revealed that energy companies in Europe are facing margin calls totalling at least $1.5 trillion.
In response to the catastrophic energy mismanagement in Europe, European Commission President Ursula von der Leyen outlined plans that do not address the core issue of energy supplies.
Consequently, Europe is signalling that it will take the ’emerging market approach’, which includes demand destruction and currency debasement to pay finance the bloc’s energy needs.
This begs the question: is this strong Bitcoin rally an early smoke-alarm for what Central Bankers are planning?