Bitcoin has recently experienced a historic price surge. This digital currency closed above $119,000 last night. This is the highest weekly close in Bitcoin's history.
As our friends at Geiger Capital aptly put it, "It's amazing. Price discovery."
And this is how price discovery works.
Bitcoin prices will continue to rise higher until new buyers run out.
So, how high can the price of bitcoin rise during this price discovery?
You can see on the chart that in November 2024, bitcoin rose from $70,000 to $90,000 in a matter of weeks after breaking the previous high.
Bitcoin will reach $140,000 in the next two weeks or so if the asset follows a similar 30% breakthrough.
I don't expect we'll see $140,000 anytime soon.
I'm just showing you what happened the last time bitcoin was in a similar price discovery phase.
This brings us to another question - what caused bitcoin to finally break out of the previous range between $100,000 and $110,000?
The answer is a bit more complicated.
First, we know that Bitcoin ETFs had significant inflows at the beginning of July. Barchart highlights that last Thursday was the second highest inflow day for the entire Bitcoin ETF.
More than $1.2 billion inflow for bitcoin ETF in a single trading session is truly remarkable.
It's hard to explain how successful the bitcoin ETF launch has been for Wall Street.
Eric Balchunas from Bloomberg provides his best visualization of how dominant the IBIT Blackrock fund is.
Eric wrote, "$IBIT broke the $80 billion mark last night, the fastest ETF to achieve it in 374 days, about 5 times faster than the previous record held by $VOO, which achieved it in 1,814 days. With a value of $83 billion, this ETF is now the 21st largest ETF overall."
Eric then explained the collective success of Bitcoin ETFs by saying, "total assets for all spot Bitcoin ETFs surpassed $140 billion for the first time."
This is a monster number for a product that is about 18 months old.
In addition to ETF inflows, bitcoin options expired at the end of June for the second quarter.
As Jordi Visser told me in our weekly podcast on Saturday — "at the end of each quarter, there is a lot of open interest from those selling future production... the volatility is suppressed.
Bitcoin volatility is below 40, so I think after the expiration period ends, the selling pressure will ease.
So you can't ignore the importance of option expiration that occurs a few days before the bitcoin rally.
But that's not the whole story. Jordi went on to explain that short sellers had piled up and got squeezed, which reinforced the upward price movement.
He told me, "There has been a lot of short selling that has built assets in the $110,000 - $120,000 range around the previous all-time high."
Now it makes more sense.
We are seeing a series of interconnected events. Bitcoin ETF inflows are nearing record levels, bitcoin options have just expired, and short sellers have become too complacent, leading to their liquidation as prices rise.
No matter how high we rise in the short term, the professional investment world has finally realized that Bitcoin is not going away.
These organizations and individuals will continue to bid assets to much higher levels in the coming years.
There will be a lot of volatility along the way, including a weakening market. But make no mistake — Wall Street is giving up.
They are waving the white flag. No one wants to ignore, fight, or mock Bitcoin anymore.
They all want to buy and hold it.
What else can they do if they don't find a way to outperform it? I keep saying it over and over... bitcoin is the new hurdle. If you can't beat it, you have to buy it.