As an experienced analyst, I have observed the crypto market closely for years, and the recent price drop in Bitcoin is not a surprising development to me. The lack of sufficient margins leading to over $150 million in long liquidations is a clear indication of a shift in sentiment among traders.
As a crypto investor, I’ve noticed that when bitcoin dipped below $60,000 on Tuesday, it triggered the liquidation of over $150 million worth of long positions due to insufficient margin requirements. Long positions represent bets on price increases in an asset, so the sudden drop caused significant losses for bitcoin’s long traders. The derivatives data now reveals that bullish sentiment among traders has shifted from optimistic to neutral after a five-week run.
Since mid-June, traders have been shifting their focus away from Bitcoin due to its increased risk. On June 7th alone, the cryptocurrency experienced a significant drop of approximately 16%, descending from its peak at roughly $72,000.
The interest of investors in Bitcoin derivatives has been waning since the cryptocurrency started performing strongly this year, as indicated by the bitcoin futures premium reaching an all-time low on Monday. This metric represents the price gap between Bitcoin derivative contracts and spot market prices.
As a researcher studying the Bitcoin market, I’ve noticed an intriguing trend in the Bitcoin futures premium indicator. This metric reached a peak of 16.5% on June 7, reflecting the strong bullish sentiment driving up bitcoin prices. However, over the past few weeks, this premium has been steadily decreasing. Currently, it stands at around 8%, falling below the 10% threshold that typically signifies a bullish scenario for Bitcoin.
The demand to sell Bitcoins has grown noticeably, as indicated by the surge in put (sell) option contracts. This trend has reached its peak in the past month. In contrast, the number of call (buy) options has decreased. The ratio of put options to call options, which is an indicator of market sentiment, has dropped sharply to 35%. This ratio was much higher at 80% only a week ago.
As an analyst, I would attribute the recent drop in bitcoin prices to a combination of macroeconomic and crypto-specific factors. On the macroeconomic front, a robust US dollar performance and heightened investor interest in less risky assets like tech stocks have put downward pressure on the cryptocurrency market. In addition, there are crypto-related developments that have contributed to this trend. For instance, the German government’s decision to liquidate millions of dollars worth of bitcoins it had held since 2013 and Mt Gox’s announcement of returning 140,000 bitcoins to its creditors have further fueled market volatility.
Miners selling more Bitcoins due to reduced earnings following the Bitcoin halving is another explanation for the cryptocurrency’s disappointing results.
Image by Monoar Rahman Rony from Pixabay
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2024-06-27 16:41