Bitcoin Peaks Amid Chinese Stocks Turmoil and Fears of Recession
Summary:
As U.S. markets react to instability in China's stocks, Bitcoin (BTC) reached a record February high of over $43,500. The spike accompanies heightened concerns of a Chinese recession and increasing controls on short selling. Additionally, Bitcoin's volatility surged with a rise in open interest while outflows from the Grayscale Bitcoin Trust maintained a hopeful descending trend. Bitcoin, however, still lacks liquidity directly below the spot price, suggesting a downturn. At the same time, emerging liquidity around a much lower price indicates possible sentiment towards a dip.
As U.S. markets respond the turmoil in China's stocks, Bitcoin (BTC) soared beyond $43,500 at the onset of Wall Street trading on February 5. Current data from the metrics by Cointelegraph Markets Pro and TradingView highlight a record-breaking new peak in BTC's February pricing, reaching $43,515 on Bitstamp. Bitcoin’s temperature rose during the first Asia trading session of the week, in the wake of the China CSI 1000 index losing 8% in a single day. Consequently, authorities have implemented additional controls on short selling.
The Kobeissi Letter, a resources trader, expressed concerns about a possible recession, highlighting the existing disparity between large and small-cap stocks. According to a post on X (previously known as Twitter), "China's market has officially lost $7 TRILLION in value over the last 3 years." Amidst promises from China to stabilize its markets, investor anxieties remain high. Many investors anticipate a priority focus on big cap stocks from China's side, providing explanation to the glaring discrepancy between large and small caps.
Bitcoin's volatility was also bolstered by a sharp uptick in open interest, totaling $775 million, according to data shared on X, by J. A. Maartunn of the on-chain analytics platform, CryptoQuant. At the same time, net offloads from the Grayscale Bitcoin Trust (GBTC) were less than previous days, averaging about 2,600 BTC, maintaining a promising descending trend.
Material Indicators' co-founder Keith Alan adds another twist of caution to the fluctuating BTC value whilst examining the order book composition. Despite market turbulence, he pointed out that Bitcoin still faces a liquidity deficit just beneath the spot price, suggesting an effortless slump to $42,000. On a broader note, liquidity is escalating much lower, around $25,000. He suggests this indicates a budding sentiment leaning towards a dip. “While this doesn’t indicate an instant or certain plunge, it suggests a prevailing sentiment for this level,” he adds. However, he questioned if this sentiment was genuine or merely positioning for a potential dip, committing to observe any additional liquidity added in this range under the belief that liquidity reflects sentiment.
Alan further noted that the ladder of ask liquidity above spot, which is progressively reducing, implies an immediate surge to $45,000 or more in the short term. This article does not offer investment advice or suggestions. All investments and trading actions carry a level of risk, therefore, it is advisable for readers to carry out independent research when deciding.
Published At
2/5/2024 6:20:37 PM
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