Bitcoin’s price experienced a significant decline after briefly reaching $63,800 on July 1. It dropped to a low of $56,746 on July 4, representing an 11% decrease from its peak. Despite attempts to regain the $58,000 support, Bitcoin is still 21.5% below its all-time high of $73,757 in March.
However, the demand for Bitcoin derivatives and stablecoins in China indicates that traders are still optimistic about the continuation of the bull market in 2024.
While Bitcoin’s price has fallen, the S&P 500 index reached a new all-time high on July 3, and gold remains close to its record high. This surge in the stock market is driven by strong corporate earnings and the expectation of interest rate cuts by the US Federal Reserve. It shows that the decline in the cryptocurrency market is not related to the broader demand for riskier assets.
Additionally, the US 5-year Treasury yield has remained stable, indicating no movement towards safer assets. This trend would typically lead to a decrease in yields, but it hasn’t materialized recently, leaving Bitcoin’s slide without support from broader macroeconomic trends.
Despite the selling pressure, Bitcoin whales and market makers have shown resilience, as seen in two key derivatives metrics. Monthly contracts, favored by professional traders, usually trade at a premium in a neutral market. The BTC futures premium fell to 7.5% on July 4, within the neutral territory. It briefly exceeded the bullish threshold but returned to a level similar to the previous price correction.
Options markets also indicate balanced pricing between call and put options, suggesting no urgent demand for hedging through Bitcoin options.
To gauge market sentiment, it’s important to look at the demand for stablecoins in China. The premium for China’s USDC stablecoin dropped below 1% on June 28, indicating a rush to liquidate cryptocurrency holdings. However, it rebounded to 1.8% on July 4, suggesting increased buying activity as traders convert fiat currency into stablecoins.
Considering the lack of bearish signs in Bitcoin derivatives and the rebound in stablecoin demand, it is likely that Bitcoin will regain support at the $60,000 level soon.
(Note: This article does not provide investment advice or recommendations. Readers should conduct their own research and make informed decisions.)