Bitcoin hit a four-month low this morning, breaking through key technical supports as traders anticipated the release of long-lost tokens from Mt. Gox (moved 47,229 Bitcoin overnight) and continued selling pressure from the German government offloading further BTC to exchanges (around USD 175 million) yesterday, along with selling by momentum-driven leveraged players.
One could argue that this is merely short-term price action and that institutional adoption of crypto is still in its early stages. When the market is bullish long-term and overexposed on the long side, overleveraged traders often face short-term negative price movements, which clears out weaker positions before the market resumes its upward trend.
The price of BTC was on the way of its recovery over the weekend from USD 60,000 on Friday to 63,800 on Monday before selling off more than 16% throughout the week and reaching a low this morning of USD 53,500 (lowest point since late February). In the past 24 hours, USD 675 million in crypto assets have been liquidated, with long positions making up USD 578 million. Bitcoin led these liquidations with USD 184 million in long positions erased. Before yesterday’s move BTC’s Open Interest was still above 2021 ATH levels and has now declined for more than 15%. In the last bull market, daily liquidations of over USD 1 billion were common, whereas this bull market hasn’t yet experienced a single day of USD 1 billion liquidations.
From a technical perspective the market rejected the closely watched 1D EMA 100 bands on Monday and broke through the 1D EMA 200 bands as well as 1D 200 SMA. The 1D 200 EMA bands haven’t been tested since mid-October 2023. Historically, if in a bullish state (EMA100 > EMA200) this always led to choppy markets.
ETH and altcoins even fell stronger than BTC, with ETH dipping more than 19% WoW and breaking trough the USD 3,000 levels and as well as loosing key technical levels same as BTC. ETH is currently trading around USD 2,870 with first support around USD 2,800. The ETHBTC fell more than 5.5% WoW and is currently trading below 0.053.
The 30-day BTC ATM implied volatility rose from 46% to 53% (+7% WoW), and the 30-day ETH ATM implied volatility rose from 60% to 67.5% (+7.5% WoW). Due to ongoing bearish sentiment, markets sought downside protection, turning the 25-delta skew negative (puts more expensive than calls) for both BTC and ETH across 0-30 day timeframes (last Friday was negative between 0-14 days). For timeframes over 30 days, the skew remains positive, with a higher positive skew for ETH, indicating expected ETH outperformance likely due to the upcoming ETH Spot ETF launch in the near future.
This afternoon, all eyes are on US Nonfarm Payrolls and employment data. If the data disappoints, we could see a short-term relief in crypto assets as this would increase the likelihood of near-term rate cuts by the Federal reserve. Conversely, strong numbers supporting the DXY/USD could inflict more pain on risk assets, especially crypto, which has underperformed other risk asset classes since May.
Key economic events include Fed Chair Powell testifying in Congress on Tuesday and Wednesday, while Thursday US CPI and on Friday US PPI data will be released which will give some further stance on the Fed’s upcoming interest rate policy and potential rate cuts this year.
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