(Kitco News) – Bitcoin (BTC) bears made their presence felt in early trading on Wednesday as they made another attempt to break the back of support at $60,000, dropping the top crypto to a low of $59,515 before dip buyers managed to push it back above $60,100.
BTC/USD Chart by TradingView
The rapid sell-off caught many traders off guard, with data from Coinglass showing that $148.55 million in long positions were liquidated, while those with short positions suffered $24.3 million in losses.
As for the source of the pullback, analysts highlighted several factors weighing on prices and sentiment, including the Mt. Gox distribution of Bitcoin to creditors and the recent strength of the U.S. jobs market.
According to a Telegram note from Singapore-based QCP Capital, concerns that large BTC sales will follow the distribution of the Mt. Gox Bitcoins is a likely contributor to the bearish sentiment, despite multiple analysts saying that these concerns are overblown.
“The Mt Gox release is also slated to happen this week," QCP Capital said. "This overhang of up to 140,000 BTC should continue to weigh on markets, especially since the exact release schedule is unknown right now.”
“Current market sentiment remains volatile, likely influenced by apprehensions surrounding large BTC liquidations following distributions from the defunct Mt. Gox exchange,” said analysts at Secure Digital Markets. “The potential release of up to 140,000 BTC, with an indeterminate schedule, is expected to weigh heavily on the market. Nonetheless, many traders maintain a long-term bullish outlook, anticipating a surge to $150,000 once the Mt. Gox distribution concludes.”
Tuesday’s better-than-expected JOLTS report also factored into the pullback as it showed that the U.S. job market remains strong. While some analysts voiced concerns that the stronger-than-expected labor market could hamper the chances of a rate cut in September, comments from Federal Reserve Chair Powell helped to quell these fears.
Also helping to calm these concerns were reports on Wednesday that painted a different picture than that offered by JOLTS. Jobless claims ticked higher over the past month, and the latest data from ADP also showed that annual wage increases for workers who stayed in their same job increased at the slowest rate in nearly three years in June. For job changers, annual wage increases slid for a third straight month.
June saw the wages for job stayers rise 4.9% from the prior year, slower than the 5% pace seen in May and the slowest growth since August 2021. Workers who changed jobs saw their pay increase 7.7% year over year, down from 7.8% the month prior and well below the 16.4% seen at its peak in June 2022.
Following the dovish comments from Powell and the latest updates on the jobs front, sentiment around the possibility of a rate cut in September climbed higher. The market now puts the odds of a rate cut in September at 74%, up from 68% on Tuesday, according to the CME FedWatch Tool.
Spot Bitcoin exchange-traded fund (ETF) flows also influenced trading on Wednesday as Tuesday saw the five-day streak of inflows end with outflows of $13.7 million.
The slower pace of inflows suggests that institutional investors have halted their buying for the time being, according to Markus Thielen, founder of 10x Research, with retail being the primary purchasers in recent weeks.
"When Bitcoin dipped to 56,500 on May 2, Blackrock claimed ‘sovereign wealth and pension funds’ were coming," Thielen noted. "This helped arrest the decline, but now Blackrock says that 80% of their Bitcoin IBIT ETF buying is from retail, not institutions.”
JPMorgan backed up this assessment, with analysts at the bank saying that 80% of the inflows into spot ETFs came from existing crypto market participants.
And with Bitcoin flirting with support at $60,000, Thielen warned that ETF buyers face a potential large-scale liquidation. "We estimate that the average Bitcoin ETF entry price is $60,000 to $61,000, and re-testing this level could result in a wave of liquidations," Thielen said.
While the near-term picture for Bitcoin is cause for concern for many, others remain optimistic about how the top crypto will perform once the Mt. Gox saga pays out, including Tom Lee, the head of research at Fundstrat Global Advisors, who says a rally to $150,000 is on the table.
"One of the biggest overhangs is going to disappear in July, I think it's a reason to expect a sharp rebound in the second half," Lee said in a CNBC interview Tuesday. "$150 [thousand] is within [reach].”
Lee noted that Bitcoin makes its biggest gains during just ten days of the year, and if you take out the ten best days from any year, “Bitcoin actually has a negative return,” so a breakout rally is not out of the question.
And according to market analyst TradingShot, Bitcoin’s tendency to experience rhyming cycles suggests that King Crypto could hit $300,000 before this bull market is over.
“Right now the price has completed 4 months of consolidation following the early March All Time High (ATH), always above the 1W MA50 (blue trend-line),” TradingShot wrote. “This consolidation is consistent with all previous post-Halving price actions as BTC always traded sideways and accumulated in the weeks after the Halving, in preparation for the Parabolic Rally, the Cycle's most aggressive phase.”
“The 1.0 Fib is currently a little under $300000, and as we mentioned after the consolidation of each Halving, Bitcoin posts the most aggressive (parabolic) rally of the Bull Cycle,” he added. “So that leads us to assume that the Top of the current Bull Cycle will be at least $300k. To give a relative sense of pathing, we have plotted the 'post Halving rallies' of the previous three Cycles on the current Channel starting on Halving 4.”
“As you can see, the orange (2013) and black (2020 - 2021) lines are more aggressive than the purple (2016 - 2017) but the latter is the one that, as we've posted numerous times, the current Cycle has the most similarities with,” TradingShot said. “If Bitcoin follows the purple price action within the black Fibonacci Channel, then it should reach $100k by December 2024 and $300k by August 2025. If instead it transitions to the more aggressive Cycle models, then it could reach those levels much earlier.”
At the time of writing, Bitcoin trades at $60,210, a decrease of 2.8% on the 24-hour chart.
