The price of Bitcoin recently increased from about $60,000 on May 1 to $65,000 on May 6. This was not surprising to anybody who are aware with Swissblock’s Bitcoin Fundamental Index (BFI). This novel method indicated a reversal by correctly predicting the climb.
Just prior to the rally, the BFI, which links basic Bitcoin network parameters to price fluctuations, saw a decrease in seller demand and an acceleration in network expansion. This implied that there was little possibility of a decline and that a rebound was imminent. In particular, the BFI had dropped to historically low levels that coincided with the bottom of the market, which made it a perfect moment for investors to think about getting into the market.
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During that time, there was a noticeable rise in transactions over $100,000 according to on-chain data, and there was a consistent influx and outflow on exchanges, suggesting a generally stable sentiment in the market. Around $8.3 billion was brought into exchanges overall, while withdrawals came in at $7.23 billion, indicating that even if some investors cashed out, there was enough purchasing pressure to keep the market rising.
Liquidity expectations were expected to be confirmed ahead of the Federal Open Market Committee (FOMC) meeting, which helped to boost confidence on the cryptocurrency markets. The price increased as investors positioned themselves for potentially advantageous policies, mostly due to this expectation.
The BFI also revealed that the concentration of big investors was very modest at 11%, suggesting that whale activity, which frequently results in heightened volatility, was not the main driver of the recent price rise. Furthermore, with a score of 1, the price connection with Bitcoin did not change.
