Bitcoin (BTC) price fell 5.8% from June 23 to June 24, reaching a seven-week low of $59,700. Although there was a gradual recovery to $60,400, a total of $153 million in leveraged BTC buy futures were forced to liquidate due to insufficient margin. The move moved the derivatives indicator to a neutral sentiment, ending a five-week bullish trend.
Concerns surrounding the sale of Mt. Gox and the German government
Traders are now questioning whether the worsening cryptocurrency market conditions mean a longer bear market or a temporary panic as miners are forced to cover costs due to low profitability and the potential sale of large stashes by known entities. Should traders wait for a drop to $57,500 or increase their positions during this period of fear, uncertainty and doubt?
Some analysts believe the failed exchange Mt. Concerns have been raised after the Gox bankruptcy estate announced its redemption in Bitcoin was imminent. Anonymous influencer fejau emphasized that the payment announcement may have been anticipated by insiders, which explains the recent price weakness. However, Fejau was puzzled by Bitcoin’s performance given the constructive macroeconomic scenario.
On May 28, 2024, Mt. Gox transferred 141,686 BTC worth $8.6 billion, marking the first move on the collapsed exchange in five years. The trustee confirmed that “part of the cryptocurrency recovery claim” will be released in July 2024. It is unclear how many coins will be effectively distributed in the short term, but investors are exiting the cryptocurrency market for fear that a significant portion will be sold off.
A recent incident on June 19 in which Arkham Intelligence transferred nearly 6,500 BTC from a wallet owned by the German government also sparked speculation about a potential sell-off. The wallet contained 50,000 BTC worth $3 billion, believed to have been seized from an illegal movie website operating in 2013. It was recently transferred to a known exchange, although no official confirmation was provided.
Despite the possibility of a year-end interest rate cut in the U.S., which would benefit risk assets such as Bitcoin, traders are more focused on inflation data and the uncertainty surrounding the U.S. presidential election in November. If the economy shows signs of an impending recession, investors are likely to seek protection in cash positions and short-term U.S. Treasury bonds.
The U.S. Personal Consumption Expenditures (PCE) inflation index is expected to be released on June 29, and economists expect it to rise 0.1% in May compared to the previous month. Traders are feeling uneasy about the stock market, especially after chipmaker Nvidia fell 5% on June 24. Concerns about demand for artificial intelligence amid fierce competition from Intel, AMD and others have led investors to question the sector’s valuation.
Bitcoin Derivatives Signal Weaker Conditions, But Possibly Exaggerated by FUD
In this scenario, characterized by moderate levels of fear, uncertainty and doubt (FUD), Bitcoin traders have become increasingly risk-averse. This is especially true after the BTC price plunged 16% since June 7, the last time it approached the $72,000 level. Bitcoin futures premiums, which measure the price difference between derivatives contracts and the regular spot market, hit their lowest level in six weeks on June 24, reflecting a lack of investor enthusiasm.
Data shows that BTC futures premiums fell to 8% on June 22, below the 10% threshold for bullish sentiment. This indicator previously peaked at 16.5% on June 7, but worsened every week as the Bitcoin price failed to show strength.
Related: Bitcoin 4 week correction? Mt. Gox says German government won’t add selling pressure
Likewise, demand for Bitcoin put options surged to the highest level in four weeks compared to call options.
Hedging demand using protective puts is the main reason why the BTC options put-call volume ratio reached 0.75 on June 24th. This level still favors the call option by 35%, but this is down from the previous week’s average of 80. %. Essentially, the Bitcoin derivatives indicator is signaling that traders are no longer convinced of a bull market, but there is a possibility that investors may overreact to the news, meaning support at $60,000 could remain in place.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.