The price of Bitcoin (BTC) surpassed $24,000 on Dec. 19, reaching a new all-time high. On Coinbase, BTC peaked at $24,200 and has since consolidated into the $23,500 to $23,800 range.
Three factors pushed the price of BTC upwards within a short period, leading it to a record-high. The factors are a large short squeeze, stacked sell orders at $23,600, and the market’s reaction to the U.S. Treasury’s self-custodied wallet rule proposal.
A massive short squeeze occurs again at $23,600
According to data from Bybt.com, $138 million worth of short contracts were liquidated today.
The mass liquidation of short contracts occurred just as Bitcoin surpassed $23,600. The $23,600 area was a key resistance level because of stacked sell orders across major exchanges.
On Bitfinex, the $23,600 and $23,800 resistance levels had large sell orders before the rally occurred. As the Bitcoin price began to increase, it squeezed out shorts and sellers in the $23,600 to $23,800 resistance range.
Typically, a short squeeze happens when a seller is forced to market buy their position because the price of Bitcoin goes up. This causes the buyer demand to surge within a short period, often leading to a large breakout to the upside.
The market is unfazed by the U.S. FinCEN rule
On Dec. 19, U.S. Treasury Secretary Steven Mnuchin revealed a rule proposal concerning self-custodied wallets.
The rule requires exchanges to keep track of withdrawals and deposits above $3,000 that originated from non-custodial wallets. If the transactions surpass $10,000, then exchanges would have to report directly to the Financial Crimes Enforcement Network (FinCEN).
However, as analysts explained, the rule itself is not as bad as industry executives initially thought. Cointelegraph reported that unless the proposal becomes law, Bitcoin price and the wider crypto market would likely ignore the news.
Jake Chervinsky, a general counsel at Compound Finance, said:
“Let’s look on the bright side for a minute. This doesn’t require KYC for every transaction with a non-custodial wallet. It isn’t an outright ban on self-custody. It doesn’t prohibit the act of using a permissionless network. It really — REALLY — could have been much worse.”
Still, despite the positive catalysts, in the near term, traders believe Bitcoin could consolidate or pull back, due to the overextension of the rally.
Scott Melker, a cryptocurrency trader, pinpointed the Relative Strength Index (RSI) of Bitcoin on the 4-hour chart to suggest that overbought bear divergences are likely to occur. He said:
“Closed my $BTC leveraged long. Overbought bear divs are likely, not guaranteed. But I would love to long a retrace if given the chance. Especially a retest of the old all times high as support.”
Read more:3 reasons why traders expect continuation after Bitcoin price spike to $24K