Bitcoin Recovers from Dip and Eyes $72,000: Market Remains Cautiously Optimistic
Summary:
Bitcoin recoiled from its earlier dip and restored support at $69,000, following a slide down to $66,000 due to macroeconomic uncertainties and selling pressures from miners and ETFs. The rebound was fueled by positive US inflation data which boosted risk-on assets. Traders are now speculating about Bitcoin exceeding the $72,000 mark. Despite a dip in U.S. Treasuries and uneasy investors following substantial sell-offs by miners, the overall sentiment in the market remains cautiously optimistic. Future trends will largely depend on institutional cash inflows and the balance between call and put options in the derivatives market.
The popular cryptocurrency Bitcoin (BTC) made a recovery from a drop to $66,000, reclaiming its foothold at $69,000 on June 12. The decrease was a result of various factors, including macroeconomic instability, cryptocurrency miners' sell-offs, and decline from spot exchange-traded funds (ETFs). Encouraging inflation data in the United States paved the way for an improved setting for assets prone to risk, such as Bitcoin, giving a lift to the S&P 500 that peaked to a record height on June 12. There is now speculation among traders about the likelihood of Bitcoin shooting past $72,000, with the derivatives market hinting at this as a potential development.
The resilience of inflation is beneficial to Bitcoin and other risk-bearing assets. The United States Consumer Price Index (CPI) for May spiked by 3.3% compared to the previous year's figure due to a 3.6% fall in energy costs. CNBC reports, this figure, although exceeding the Federal Reserve's (Fed) goal, was still lower than expected by the market, hinting at the probability of interest rate reductions by September. Consequently, there was a sell-off in U.S. Treasuries, leading the 2-year yield to sink to its lowest level in ten weeks at 4.68%.
To evaluate if Bitcoin's abrupt rise on June 12 was a brief burst of optimism influenced by macroeconomic data, it is essential to scrutinize whether the sell-off from miners and withdrawal from ETFs will persist. Regardless of the positive outlook on inflation and the perceived recessionary threats by investors, the direction of Bitcoin towards $72,000 will be determined primarily by large scale institutional investments.
Moreover, even informed investors are becoming increasingly apprehensive about miners impacting BTC's cost trends. When there is a substantial movement of assets from miners to exchanges, investors fear a major price drop. On the 11th of June, for instance, Marathon Digital sold 1,000 BTC - equivalent to nearly $70 million - on June 10, attending to CryptoQuant's head of research, Julio Moreno. This significant sell-off raises negative sentiments among Bitcoin investors, even if it happens for reasons beyond control.
The scenario was further complicated by a collective net outflow of $65 million on the same day from US-based spot Bitcoin ETFs. This led traders to speculate that these units were foreseeing potential problems, resulting in a substantial net outflow of $200 million from spot ETFs on June 11. This substantial withdrawal geometrically preceded significant macroeconomic incidents, such as a speech from Jerome Powell, Fed Chair, post the monetary council meeting on June 12.
Bitcoin derivatives demonstrated resistance during the fall to $66,000. Bitcoin's key derivative metrics displayed consistency during this dip, implying traders weren't overdependent on excessive leverage. The Bitcoin futures premium, a measure gauging the price difference between the monthly contracts in the futures market and the ongoing rate on conventional exchanges, generally mirrors a 5% to 10% annualized premium. This difference accounts for the extended settlement period.
According to Laevitas, the Bitcoin 2-month futures premium briefly dipped to the neutral 10% mark on June 11 but steadily climbed back up to 13%. This movement evidences a cautiously optimistic mindset among traders, with the prospect of the basis rate soaring beyond 40% during extraordinarily bullish periods. To get an accurate sense of the market sentiment, one needs to balance the demand for call (buy) and put (sell) options. A surge in the activity of put options usually signals a drift towards a more bearish market sentiment.
Despite the Bearish slump around the $66,000 mark, both, the Bitcoin futures and options markets indicate that the prevailing sentiment is bullish. Suggesting, the potential for Bitcoin to climb up to $72,000 is still on the cards. It is important to note that this article merely provides information and should not be used as legal or investment advice. The thoughts, views, and opinions conveyed here belong solely to the author and do not necessarily depict or represent the views and opinions of Cointelegraph.
Published At
6/12/2024 9:53:01 PM
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