Bitcoin (BTC) experienced a 5.8% drop in price between June 23 and June 24, reaching its lowest point in seven weeks at $59,700. Despite a slight recovery to $60,400, this drop resulted in $153 million worth of leveraged long BTC futures being forcefully liquidated due to insufficient margin. As a result, derivatives metrics shifted to a neutral sentiment, signaling the end of a five-week bullish trend.
Traders are now questioning whether the current crypto market conditions indicate a longer bear market or a temporary panic caused by miners covering expenses amid lower profitability and the potential sale of large amounts of Bitcoin by known entities. They are unsure whether to wait for a price dip to $57,500 or increase their positions during this period of fear, uncertainty, and doubt (FUD).
Analysts have raised concerns following the recent announcement by the Mt. Gox bankruptcy estate that Bitcoin repayments are imminent. Fejau, an anonymous influencer, suggests that insiders may have anticipated this announcement, explaining the recent price weakness. However, fejau is puzzled by Bitcoin’s performance given the positive macroeconomic scenario.
On May 28, 2024, Mt. Gox moved 141,686 BTC worth $8.6 billion, marking the first movement from the collapsed exchange in over five years. The trustee has confirmed that a portion of the cryptocurrency rehabilitation claims will be released in July 2024. Investors fear that a significant portion of these coins will be sold, leading to an exit from the crypto markets.
Another transfer of nearly 6,500 BTC on June 19 from a wallet attributed to the German government has also sparked speculation of a potential sell-off. The wallet held nearly 50,000 BTC, worth over $3 billion, believed to have been seized from an illegal movie website in 2013. Although not officially confirmed, the transfers were made to known exchanges.
Despite the possibility of interest rates decreasing in the United States by the end of the year, which would benefit risk-on assets like Bitcoin, traders are more concerned about the uncertainty surrounding the U.S. presidential elections in November and inflation data. If the economy shows signs of a looming recession, investors are likely to seek protection in cash positions and short-term U.S. Treasuries.
Traders are becoming less comfortable with the stock market, particularly after chipmaker Nvidia’s recent decline of 5% on June 24. Concerns about artificial intelligence demand and competition from Intel, AMD, and others have led investors to question the valuations of the sector.
In this environment of fear, uncertainty, and doubt, Bitcoin traders have become increasingly risk-averse, especially as the BTC price has dropped 16% since June 7. The Bitcoin 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, below the 10% threshold for a bullish sentiment. The indicator had previously reached a peak of 16.5% on June 7 but has steadily worsened as Bitcoin’s price failed to show strength.
Similarly, the demand for Bitcoin put (sell) options has increased relative to call (buy) options, reaching its highest level in four weeks. This demand for protective puts is the main reason behind the BTC options put-to-call volume ratio reaching 0.75 on June 24. While call options still dominate by 35%, this represents a decrease from the previous week’s average of 80%. Overall, Bitcoin derivatives metrics suggest that traders are no longer confident in the bull market, but there is a possibility that investors are overreacting to the news and that the $60,000 support level could hold.
It is important to note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risk, and readers should conduct their own research before making any decisions.