Bitcoin (BTC) experienced a 5.8% price drop on June 23 and June 24, hitting its lowest point in seven weeks at $59,700. Although it recovered slightly to $60,400, this decline resulted in the forceful liquidation of $153 million in leveraged long BTC futures due to insufficient margin. As a result, derivatives metrics shifted to a neutral sentiment, putting an end to a bullish trend that had lasted for five weeks.
Traders are now questioning whether the current crypto market conditions indicate a longer bear market or just a momentary panic caused by miners having to cover expenses amid lower profitability and the potential sale of large amounts of Bitcoin by known entities. Should traders wait for a further dip to $57,500 or increase their positions during this period of fear, uncertainty, and doubt?
Some analysts have expressed concerns following the announcement of the imminent repayment in Bitcoin by the Mt. Gox bankruptcy estate. An anonymous influencer named fejau suggested that insiders may have anticipated the disbursement, which could explain the recent price weakness. However, fejau is puzzled by Bitcoin’s performance given the positive macroeconomic outlook.
On May 28, 2024, Mt. Gox made its first movement in over five years by transferring 141,686 BTC worth $8.6 billion. The trustee has confirmed that a portion of cryptocurrency rehabilitation claims will be released in July 2024. While the exact number of coins to be distributed in the near term is uncertain, investors are concerned that a significant portion will be sold, leading to an exit from the crypto markets.
Speculation of a potential selloff has also been triggered by a recent transfer of nearly 6,500 BTC on June 19 from a wallet believed to be attributed to the German government. The wallet held almost 50,000 BTC, worth over $3 billion, which was believed to have been seized from an illegal movie website in 2013. Although there is no official confirmation, the transfers were made to known exchanges.
Despite the possibility of interest rates decreasing in the United States, which would benefit risk-on assets like Bitcoin, traders are more focused on the uncertainty surrounding the U.S. presidential elections in November and inflation data. If the economy shows signs of an imminent recession, investors are likely to seek protection in cash positions and short-term U.S. Treasuries.
The U.S. Personal Consumption Expenditures (PCE) inflation index is expected to be released on June 29, with economists predicting a 0.1% month-over-month increase in May. Traders are growing less comfortable with the stock market, especially after chipmaker Nvidia’s 5% decline on June 24. Concerns about artificial intelligence demand and competition from Intel, AMD, and others have led investors to question the sector’s valuations.
In this environment of fear, uncertainty, and doubt (FUD), Bitcoin traders have become increasingly risk-averse. The BTC futures premium, which measures the price difference between derivatives contracts and the regular spot market, reached its lowest level in six weeks on June 24, indicating a lack of investor enthusiasm.
Data shows that the BTC futures premium dropped to 8% on June 22, falling below the 10% threshold for a bullish sentiment. The indicator had previously reached a peak of 16.5% on June 7 but has worsened each week as Bitcoin’s price failed to show strength.
Similarly, the demand for Bitcoin put (sell) options has surged to its highest level in four weeks compared to call (buy) options. The increased demand for protective puts is the main reason behind the BTC options put-to-call volume ratio reaching 0.75 on June 24. While this ratio still favors call options by 35%, it represents a decrease from the previous week’s average of 80%. Essentially, Bitcoin derivatives metrics indicate that traders are no longer confident in the bull market, but there is a possibility that investors are overreacting to the news, and the $60,000 support could hold.
It’s important to note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making any decisions.