On June 18, the price of Bitcoin (BTC) fell 5.6% in one day to $64,300, reaching its lowest level in over a month.
The six-day decline was consistent with macroeconomic data showing a slowdown in the U.S. economy, particularly in retail sales and employment. Meanwhile, the U.S. Federal Reserve (Fed) kept interest rates at the highest level in 20 years. However, the resilience of derivatives markets suggests a potential BTC price recovery in the future.
BTC price falls due to US recession risk, high interest rates
According to Yahoo Finance, U.S. retail sales increased slightly by 0.1% from the previous month, below the economist consensus of 0.3%.
Paul Ashworth, chief economist for North America at Capital Economics, noted that the data suggests gross domestic product (GDP) was “sluggish” in the second quarter. But Matthew Luzzetti, chief U.S. economist at Deutsche Bank, believes consumption is returning to “a more normal pace for the economy.”
John Williams, president of the Federal Reserve Bank of New York, said the U.S. economy and labor market were healthy and predicted, “Inflation will continue to fall in the second half of this year.” Williams said the Fed’s current policies are weighing on the economy but argued that “more data is needed” before the central bank considers cutting interest rates.
A high interest rate environment favors fixed income investments and is bad for Bitcoin. The fact that the S&P 500 index hit an all-time high on June 18, despite being led by a handful of technology companies, has a negative impact on investor interest in Bitcoin.
This scenario becomes even more concerning when combined with the fact that U.S. spot Bitcoin exchange-traded funds (ETFs) experienced $562 million in outflows in three days, according to data from Farside Investors.
Investors can gauge market sentiment by measuring the long-short ratio of top traders. By consolidating positions across perpetual and quarterly futures contracts, professional traders can gain clearer insight into whether they are leaning towards a bullish or bearish stance.
The long-short ratio for top Binance traders increased from 1.32 to 1.52 on June 13, indicating strong demand for leveraged long positions despite Bitcoin failing to maintain the $68,000 support level. On OKX, the indicator rose to 1.78 from 1.65 on June 13, suggesting that whales and market makers added net buying while the price of Bitcoin fell below $67,000.
Bitcoin Whales and Miners Are Cautiously Optimistic
To determine if a trader has been caught off guard and is currently taking a short position in the water, analysts should examine the balance between call (buy) and put (sell) options. Increased demand for put options typically indicates that traders are focusing on neutral to bearish pricing strategies.
Bitcoin options data from Deribit shows that demand for puts has declined since June 14, favoring calls more than twice as much. This suggests that Bitcoin whales and market makers did not expect the price to fall and remained optimistic throughout the decline.
In addition to ETF and derivatives traders, Bitcoin miners generate an average of 3,150 BTC per week. Miners can potentially offload more than $203 million from the market each week, so monitoring outflows is important to understand trader sentiment.
Related: Bitcoin price ‘cluster’ hints at more downside. Is BTC About to Lose $64,000 Support?
Glassnode’s Miner Outflows Multiple has remained below 0.8 since June 14, indicating reduced selling pressure. This trend contrasts with the period from May 30 to June 13, when the indicator often approached or exceeded 1.0. This means miners sold more than their previous 365-day average.
Given that Bitcoin derivatives traders held a bullish stance during the drop to $64,300 on June 18 and spot ETFs saw strong outflows, the current macroeconomic setup suggests the Fed is likely to cut interest rates. There is no reason to expect additional BTC price pressure. Rate based on year-end basis.
This article is written for general information purposes and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.