Bitcoin (BTC) experienced a 7% price drop on July 8 as it tested the $53,354 level, resulting in the liquidation of $62 million worth of leveraged long positions. However, the cryptocurrency quickly rallied by 7% to reach $58,215 in less than 8 hours, causing $96 million in short positions to be forcefully terminated.
The sudden pullback in Bitcoin’s price caught short sellers off guard. On July 8, the price returned to the exact level of $57,200 from 24 hours earlier. This suggests that entities betting on a price decline used high leverage, possibly 20x or more, which led to a significant increase in open interest on July 7. However, the subsequent price increase on July 8 wiped out all the gains in open interest.
Despite this, Bitcoin derivatives continue to show moderate bullishness, indicating a positive outlook for reclaiming the $60,000 mark soon. Analysts believe that the transfer of 16,308 BTC by the German government to market makers and exchanges in the past 24 hours dampened Bitcoin traders’ appetite. However, the fact that half of the seized coins have already been sold suggests that the selling pressure is decreasing.
According to trader and influencer RookieXBT, Bitcoin investors are likely to wait until the German government completes their sales before adding new positions. Additionally, the potential sell-off from the Mt. Gox bankruptcy estate after 10 years could also impact the market. On the other hand, the failed FTX exchange is expected to distribute cash to investors affected by its bankruptcy, which could be used to purchase cryptocurrencies.
The remaining analysis focuses on long-term aspects such as the United States central bank’s shift to an expansionist monetary policy, the results of the U.S. Presidential election, and the ongoing stock market rally. Despite concerns of an economic slowdown, companies holding record amounts of cash and equivalents may be able to buy out competitors and expand their operations at a lower cost, partially offsetting the recessionary environment.
While factors such as the German government liquidating Bitcoin and potential FTX repayments affect the market, Bitcoin’s bullishness also finds support from the futures and options markets. The annualized premium for BTC futures has stabilized near 8% since July 7, indicating a relatively positive sentiment despite the recent price decline. The options market also reflects a healthy sentiment, with a -2% skew suggesting optimism about rising prices.
However, it remains uncertain if the $55,000 support level will hold, given the fear, uncertainty, and doubt surrounding miners’ sell pressure and the potential negative impact of an economic recession on Bitcoin.
Disclaimer: This article is for general information purposes only and should not be taken as legal or investment advice. The views expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.