Bitcoin Nears 200-Day Average Ahead of Seasonally Bullish Period, Triggers Over $400M in Liquidations

Bitcoin BTC$91,815.35 rose to three-month highs on Monday, nearing a key technical resistance and crowding out bears from the derivatives market. The cryptocurrency's immediate prospects look bright, according to seasonality analysis.

The top cryptocurrency rose past $48,000, the level last seen at the end of December, and nearly challenged the 200-day moving average located at $48,250.

Technical analysts and traders track the chart's current level to its 200-day moving average to gauge underlying strength in the market. A decisive move above or below the average often yields notable rallies or declines. The cryptocurrency's sell-off deepened following the break under the average in early January.

Monday's move higher triggered market-wide short liquidations worth over $300 million, the highest single-day tally since at least early December, according to Coinglass.com. Meanwhile, exchanges liquidated long positions worth $180 million. Liquidation refers to the forced closure of long/short futures market positions due to margin shortage.

The large number of short liquidations indicates the market was skewed bearish and perhaps traders were caught off guard by the cryptocurrency's breakout of a two-month triangular consolidation.

The recent move higher has indeed been steep. The cryptocurrency has rallied 25% in two weeks on a string of factors, including continued purchases by Luna Foundation Guard to build a reserve for its stablecoin UST and the post-Federal Reserve risk reset in the stock markets.

"We have the continued buying support from Terra’s Luna Foundation Guard. We’re approaching the month and quarter-end, which could be triggering some position build-up," Noelle Acheson, head of market insights at CoinDesk's sister company Genesis Global Trading, said in an email. "There are almost daily reminders in headlines of the value of a seizure-resistant, easily portable, independent store of value, and this is likely to continue to boost BTC interest."

"We have also seen some significant signs of growing institutional support – just over the past 10 days, we’ve had statements from Goldman Sachs, BlackRock, Cowen, Bridgewater and Virtu, all signaling growing conviction that the crypto markets are worth dedicating more resources to," Acheson added.

There has been renewed investor interest in bitcoin and crypto-linked investment vehicles. For instance, inflows into ProShares' bitcoin futures-linked exchange-traded fund (ETF) have recently picked up the pace, pushing the year-to-date rise in the asset under management to 11%, according to data tracked by Kaiko Research.

"Inflows accelerated in March, suggesting improving investment appetite for this type of instrument after investors de-risked their portfolio aggressively in early 2022," Kaiko's weekly newsletter published Monday said.

CoinShares's latest weekly fund flow report shows investment products for digital assets drew $193 million last week, the highest weekly inflow since early December.

The bullish momentum looks set to continue as, historically, April has been a positive month for the cryptocurrency. Data provided by charting platform TradingView shows bitcoin has chalked up gains in April in seven out of the past 10 years. In the remaining three years, bitcoin suffered meager losses of 1% to 3%.

Lastly, bitcoin's weekly chart is showing signs of bullish revival. "Bitcoin has cleared recent highs near $45.0K and has a new weekly MACD “buy” signal, suggesting the current relief rally has staying power," Katie Stockton, founder and managing partner of Fairlead Strategies, said in a weekly newsletter published Monday.

"We move to an intermediate-term bullish bias noting intermediate-term momentum has shifted positively and the 50-day MA is pointing up," Stockton added.

The moving average convergence divergence (MACD) histogram is one of the most popular indicators for gauging trend strength and momentum. A crossover above the zero line represents a bullish shift in the momentum.

At press time, bitcoin was changing hands near $47,500, representing a 0.6% gain on the day.