Bitcoin Surges to 18-Month High: 3 Key Factors Driving the Rally

Bitcoin and other cryptocurrencies are currently performing extremely well, with Bitcoin specifically hitting an 18-month high. There are several reasons why these gains could potentially continue.

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Firstly, the price of Bitcoin has surged 7% in the past day, crossing the $37,900 mark - the highest it's been since May of the previous year. This rise comes after the market experienced disruptions due to the collapse of the stablecoin network, Terra, which led to several industry bankruptcies. Now, the largest token has recovered, climbing more than one-third in just a few weeks and putting an end to a period of extremely low volatility and trading volumes. The breakthrough above the $37,000 mark is a significant event, and there's an optimistic outlook for Bitcoin's price movement.

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The cryptocurrency market is alluring for institutional investors which is a factor contributing to the sustainability of this momentum. Apart from being driven by crypto-based catalysts, Bitcoin keeps gaining value because of improvements in the backdrop for risk-sensitive assets. A central factor driving this rally is the belief that U.S regulators will approve the first spot Bitcoin ETF soon. This approval could attract more retail and institutional investor interest.

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Aside from these points, there are a few factors that could contribute to Bitcoin's sustained gains.

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One, traders are extremely optimistic and are making large bets in the crypto derivatives market that ought to put upward pressure on prices. For example, there are a significant amount of Bitcoin call options (which are contracts that give traders the right to buy an asset at a specific price) expiring next month around both the $40,000 and $50,000 mark. Another bullish sign is the Crypto Fear and Greed Index, which is at its highest this week since November 2021.

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Secondly, the technical market backdrop supports a rally. If Bitcoin sees another breakout, the next resistance could be around $42,200.

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Thirdly, the supply of tokens is historically tight - the amount of Bitcoin held by long-term holders who are unwilling to sell is near an all-time high. When supply is tight and bullish traders are eager to buy crypto, the gains could potentially be enhanced.

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Other than Bitcoin, other cryptocurrencies are also experiencing gains. Ether, the second-largest crypto, is up by 6% reaching over $2,000. Smaller tokens or altcoins like Cardano and Polygon are also seeing solid gains, with a 9% increase each.

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Overall, the coming months seem promising for Bitcoin investors.