Bitcoin (BTC) awoke from its slumber early Thursday, but not in a way bulls would have liked to see.
The leading cryptocurrency fell to $28,346, its lowest level since June 21, extending Wednesday’s 1.6% drop that reflected risk aversion on Wall Street. US stocks fell on Tuesday on renewed concerns in the banking sector and recession fears in China.
The downside volatility in BTC comes days after the US Commodity and Futures Trading Commission (CFTC) report on trader engagement (COT) showed that leveraged funds — hedge funds and commodity trading advisors — were taking bearish bets on CME-listed Bitcoin with Cash settled futures have strengthened in the week ending August 8th.
“Two-thirds of their positions are short (shown in red) and one-third are long in blue. That’s the highest reading since April 2022,” Lawrence Lewitinn, director of content at crypto analytics firm The Tie’s, said in a weekly newsletter.
Seasoned traders may be concerned about the potential impact of the gloomy macroeconomic outlook and rising nominal and inflation-adjusted US Treasury yields.
Additionally, the crypto market has been indifferent to recent positive crypto-specific developments such as the launch of a stablecoin by PayPal, one of the largest financial services companies in the world, and a slew of futures-based exchange-traded fund (ETF) applications. tied to Ether (ETH).
“Whether it’s about one of the largest financial services companies in the world launching a stablecoin using a public blockchain infrastructure, or the craze for futures-based ETH ETFs is resurgent due to a spate of new applications, both volatility and the volume figures also continue to drop many times over. Yearly lows,” said David Lawant, head of research at institutional trading desk FalconX, in a market update.
“While improving trends and fundamentals in the crypto space continue to sustain optimism, overall it is a good time to keep an eye on potential spillover implications from macroeconomics to broader risk assets and, by extension, crypto,” Lawant added.
Bitcoin’s renewed downward volatility is consistent with its record of making interim highs following notable rallies in meme coin SHIB. The self-proclaimed Dogecoin killer is up over 20% in the first 12 days of the month, largely due to optimism that the second tier launch of Shibarium would help the cryptocurrency refresh its image as a serious industry player.
Since Aug. 12, the cryptocurrency is down 18%, with prices down 9% in the last 24 hours alone due to Shibarium’s tumultuous launch. Funding rates in SHIB perpetual futures trading on Binance have plummeted to a two-month low of -0.084%, according to data source Coinglass.
The negative value suggests that short positions are paying long positions to keep their bearish positions open. In other words, leverage tends to be bearish.
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