Bitcoin’s price experienced a 5.8% drop between June 23 and June 24, hitting a seven-week low of $59,700. Despite a slight recovery to $60,400, a significant amount of leveraged long BTC futures worth $153 million were liquidated due to insufficient margin. This caused derivatives metrics to shift to a neutral sentiment, marking the end of a bullish trend that had lasted for five weeks.
Traders are now grappling with concerns about a potential selloff from Mt. Gox and the German government. They are questioning whether the current crypto market conditions indicate a prolonged bear market or a temporary panic triggered by miners struggling to cover expenses amidst reduced profitability and the possible sale of large amounts by known entities. Should traders wait for a dip to $57,500 or increase their positions during this period of fear, uncertainty, and doubt?
Analysts have raised concerns following the announcement by the Mt. Gox bankruptcy estate regarding the imminent repayment in Bitcoin. Influential figure fejau suggested that the announcement of disbursement may have been anticipated by insiders, leading to the recent price weakness. However, fejau remains puzzled by Bitcoin’s performance despite a positive macroeconomic environment.
On May 28, 2024, Mt. Gox made its first movement in over five years, transferring 141,686 BTC worth $8.6 billion. The trustee confirmed that a portion of cryptocurrency rehabilitation claims will be released in July 2024, sparking fears among investors that a significant portion might be sold off, resulting in an exodus from the crypto markets.
Additionally, a recent transfer of almost 6,500 BTC on June 19 from a wallet linked to the German government by Arkham Intelligence has fueled speculation of a potential selloff. The wallet, containing nearly 50,000 BTC worth over $3 billion, was reportedly seized from an illegal movie website operating in 2013. Although not officially confirmed, the transfers were made to known exchanges.
Traders are closely monitoring the uncertainty surrounding the U.S. presidential elections in November and inflation data, rather than the potential decrease in interest rates by year-end in the United States, which could benefit assets like Bitcoin. If signs of an impending recession emerge, investors are likely to seek refuge in cash positions and short-term U.S. Treasuries.
The upcoming U.S. Personal Consumption Expenditures (PCE) inflation index on June 29 is anticipated, with economists predicting a 0.1% month-over-month increase in May. Traders are growing wary of the stock market, particularly after chipmaker Nvidia saw a 5% decline on June 24. Concerns about artificial intelligence demand amid fierce competition from Intel, AMD, and others have led investors to question the sector’s valuations.
Bitcoin derivatives indicate weaker conditions, possibly exacerbated by fear, uncertainty, and doubt (FUD). Traders have become more risk-averse as the BTC price dropped by 16% since June 7, when it last neared the $72,000 mark. The Bitcoin futures premium hit its lowest level in six weeks on June 24, reflecting a lack of enthusiasm among investors.
Data shows that the BTC futures premium fell to 8% on June 22, below the 10% threshold for a bullish sentiment. The indicator had previously peaked at 16.5% on June 7 but has been declining each week as Bitcoin struggles to show strength.
Furthermore, the demand for Bitcoin put options surged to its highest level in four weeks compared to call options. The main reason behind this surge is the use of protective puts for hedging, leading to a BTC options put-to-call volume ratio of 0.75 on June 24. While this still favors call options by 35%, it marks a decrease from the previous week’s average of 80%. Overall, Bitcoin derivatives metrics suggest that traders are losing confidence in the bull market, but there is a possibility that investors are overreacting to the news, indicating that the $60,000 support level could hold.
This article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers are encouraged to conduct their own research before making any decisions.