The price of Bitcoin (BTC) increased from $12,920 to $13,600 in four hours, recording a 5% rally. The uptrend coincides with positive developments from the European Central Bank, or ECB, and optimistic job data from the United States.
Macro factors favor Bitcoin rally
Throughout the past week, BTC has continuously rallied despite negative macro factors. The U.S. stock market was in a steep decline, and the number of COVID-19 cases across the U.S. and Europe rose sharply.
The perception of Bitcoin as a safe-haven asset is noticeably strengthening due to the rise in institutional demand. But when risk-on assets, such as stocks, are declining, they could place indirect pressure on BTC.
As such, when stocks rally and risk-on assets thrive, the short-term outlook for the price of Bitcoin improves.
On Oct. 29, there were several events that caused risk-on assets to increase. First, the ECB said it might seek a new stimulus package in December. Second, U.S. job data reflected the lowest weekly claims since the start of the coronavirus pandemic.
A second stimulus package in Europe achieves two things. First, it would massively increase the appetite for risk-on assets in Europe. Simultaneously, it would place pressure on the U.S. to deliver a much-needed stimulus deal.
Since U.S. President Donald Trump has made his position clear that a stimulus package will come after the election, this sets the U.S. up for a December stimulus deal.
The ECB said it would consider all possibilities in ensuring the sustainability of the economy. This benefits Bitcoin, gold and stocks altogether, as evidenced by the price of BTC. The ECB said:
“The Governing Council will carefully assess the incoming information, including the dynamics of the pandemic, prospects for a rollout of vaccines and developments in the exchange rate.”
Christine Lagarde, the president of the ECB, also emphasized that the institution acted promptly when the first wave of COVID-19 hit. Hinting that a second stimulus deal could arrive, she said:
“We have done that in the past: We have responded very promptly, very appropriately, very heavily, some would say, to the first wave that hit the euro area economies. We have done it for the first wave; we will do it again for the second wave.”
BTC prevented a bigger move down to the $12,700 area
When the price of Bitcoin moved below $13,000, technical analysts said BTC is at risk of dropping to $12,700 and lower.
The $13,000 level has acted as a strong support area, backed by whale clusters and large by orders. BTC defending the area indicates buyer demand is overwhelming selling pressure, as seen in the futures market.
The funding rate of the Bitcoin futures market has remained negative throughout the past several days. It suggests that the majority of the derivatives market is seemingly betting against BTC.
Yet, the demand for Bitcoin from the spot market is offsetting the selling pressure and defending BTC against further downside.
This post first appeared here: https://cointelegraph.com/news/bitcoin-price-spikes-5-to-13-5k-shortly-after-ecb-stimulus-announcement