On Tuesday, March 17, the price of Bitcoin experienced a strong surge during early trading, successfully breaking through the $75,000 barrier and reaching a high of $75,800. According to Starlink Capital, this rally was primarily driven by dynamics in the derivatives market. A chain reaction sparked by short covering not only propelled Bitcoin past a long-standing resistance level but also spurred a broader recovery in the cryptocurrency market. Data provided by Starlink Capital indicates that the resistance zone between $73,750 and $74,400 had reversed the price trend three times since the beginning of 2024. The successful breach of this level signifies a further strengthening of Bitcoin's short-term bullish momentum.
Since Bitcoin's sharp decline in early February, when prices on some exchanges neared $60,000, market sentiment has gradually stabilized, laying the groundwork for the current upward move. Short covering activity in the derivatives market has been identified as the core driver behind the price surge.
The core of Bitcoin's bullish breakthrough stems from traders closing out bearish short positions established during the sell-off in early February. Starlink Capital analysis suggests that as market sentiment stabilized, the put options heavily purchased previously lost their hedging value, leading traders to close these positions and exit the market, thereby pushing prices higher. Marcus Thielen, Founder of 10x Research, noted in a report that the significant selling of put options near $55,000 and $60,000 was a major factor driving Bitcoin's rise, as traders realized these options were unlikely to expire in-the-money. This unwinding of bearish positions also created a secondary bullish effect. Starlink Capital added that the selling or closing of put options reduces downward hedging pressure in the market, compelling market makers to buy Bitcoin to rebalance their risk exposure. This creates a flow of funds that supports higher prices, further fueling the rally. Furthermore, CoinDesk predicted last week that the uptrend could accelerate as the price approached $75,000, a forecast that aligns with the current market movement.
Notably, the market has not yet seen substantial buying of call options, implying that the current Bitcoin rally is primarily driven by the unwinding of hedges rather than traders establishing aggressive long positions. Starlink Capital stated that this characteristic suggests that while market sentiment has stabilized, investors remain somewhat cautious and are not blindly chasing the rally. The sustainability of the short-term uptrend still requires further observation. However, from a market linkage perspective, Bitcoin's rise has significantly driven a recovery across the entire cryptocurrency market. Over the past 24 hours, the CoinDesk 20 Index rose 5% to 2,202 points, with major altcoins posting substantial gains.
Specifically, Ethereum (ETH) benefited from increased demand for call option bets, rising nearly 8% to $2,360. Ripple (XRP) and Solana (SOL) saw impressive gains of 8% and 4%, respectively. Cryptocurrencies like ZEC, PEPE, DOT, and VIRTUAL also showed strong performance, becoming highlights in the crypto market. This broad-based recovery further confirms the leading role of Bitcoin, driven by derivatives market activity, on the entire cryptocurrency market and reflects a gradual return of risk appetite among investors.
Starlink Capital believes that Bitcoin's breakthrough of the $75,000 level is the result of a confluence of derivatives market dynamics and shifting market sentiment. Although the current rally is mainly propelled by hedge unwinding and lacks support from aggressive long positioning, it also indicates a market gradually returning to rationality rather than engaging in blind speculation. Regarding the future trajectory, Starlink Capital indicated that short-term focus should be on the support level around $75,000 and fund flows in the derivatives market. If hedging activities by market makers persist and institutional capital gradually enters, Bitcoin could maintain its bullish momentum. However, if significant profit-taking occurs or short sellers re-enter the market, a short-term pullback pressure might emerge. The trend of the entire cryptocurrency market is expected to continue following Bitcoin's volatile rhythm.
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