Bitcoin’s uptrend towards $80,000 is increasingly attracting bears

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Bitcoin is on track to hit the $80,000 mark amid a complex interplay of Middle Eastern geopolitics, changing monetary policies, and a skewed derivatives market.

Data from CryptoSlate indicates that the recent surge in the digital asset’s price was fueled by a temporary easing of tensions between the US and Iran.

However, underlying data suggests that the current price movement is driven by both forced liquidations and positive macroeconomic outlook.

Truce Boosts Bitcoin, But Hormuz Risk Remains

The recent rally in the market was spurred by President Donald Trump’s decision to extend the US ceasefire with Iran by two weeks.

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The announcement provided a temporary relief, leading to a significant price surge in digital assets. Bitcoin rose by 7% to reach $79,470 before slightly retracing to $78,200.

This rally helped calm market fears that arose when Iran initially rejected peace talks.

However, Iran’s continued objections highlight the ongoing macroeconomic risks.

Iran’s President, MasoudPezeshkian, emphasized the importance of genuine negotiations and criticized the blockade and threats from the US.

The closure of the Strait of Hormuz remains a concern, with the US enforcing a strict blockade on Iranian ports.

Geopolitical tensions continue to impact digital assets, limiting risk appetite in the market.

Focus Shifts to Fed Transition

Amid rising geopolitical tensions, the upcoming change in leadership at the Federal Reserve is becoming a crucial factor for risk assets.

Nominee Kevin Warsh’s confirmation hearings have led to speculations about a potential shift in the central bank’s approach.

Warsh’s views on inflation, forward guidance, and policy tools have sparked discussions about a more dynamic Federal Reserve under his leadership.

Traders are considering the implications of a new approach to monetary policy, which could impact liquidity-dependent assets like Bitcoin.

Short Squeeze and Tightening Supply

Besides external factors, the internal dynamics of the cryptocurrency market are contributing to Bitcoin’s upward momentum.

The current rally is supported by a heavily skewed derivatives market, with negative funding rates and a strong short bias among retail participants.

Simultaneously, Bitcoin’s exchange supply is dwindling, with exchange reserves at a seven-year low.

Data from CryptoQuant suggests a high risk of a short squeeze due to extreme positioning and a shortage of exchange inventories.

Testing the $80,000 Threshold

While forced liquidations are boosting Bitcoin’s price, the market faces challenges from significant overhead supply.

According to CryptoQuant, the $80,000 mark will be a crucial test for Bitcoin, determining its future direction based on market psychology and historical price levels.

Investors holding ETFs and short-term whales are closely monitoring their break-even points, which could lead to selling pressure if the price fails to hold above $80,000.

The market’s ability to absorb selling pressure at key levels will indicate the sustainability of the current rally.