(Kitco News) – Bitcoin (BTC) bulls looked to push the price action higher in early trading on Wednesday but met firm resistance from bears at $66,000 as the top crypto briefly rallied to $66,145 before pulling back to support near $65,000.
BTC/USD Chart by TradingView
The pause at this resistance level isn’t unexpected as BTC has rallied 12% since Sunday in the wake of the assassination attempt on Presidential candidate Donald Trump, the self-dubbed ‘crypto president’ who has jumped feet first into his support for cryptocurrencies in recent months.
July has seen a turnaround in fortunes for digital assets in general, but the outlook seemed bleak at first as Bitcoin fell from $63,840 on July 1 to hit a low of $53,514 on July 5 amid the sale of 50,000 BTC by the government of Germany.
Since that low, Bitcoin has rallied 23%, with many analysts saying that the next phase of the bull market is just getting started as headwinds fall to the wayside while tailwinds gain force.
Chief among the tailwinds is the returned expectations of interest rate cuts, with Wall Street now putting the odds of a rate cut in September at 96%.
The return of inflows into spot BTC exchange-traded funds (ETFs) is also supporting Bitcoin’s resurgence, as the 11 funds recorded a cumulative net inflow of $422.5 million on Tuesday, the highest single-day tally since June 5.
This put the streak of positive inflows at eight days and counting, according to data provided by Coinglass, with more than $1 billion flowing into ETF coffers in just the last three days.
Tuesday saw a brief dip back below $63,000 as fears around another large tranche of BTC sales spiked after Mt. Gox began distributing funds to creditors.
“The market was shaken up by Mt.Gox's withdrawal of $6.1bn worth of Bitcoins, which led to a short-term drop in BTC below $63,000,” noted Alex Kuptsikevich, senior market analyst at FxPro. “According to Arkham data, the bankrupt Mt. Gox exchange transferred nearly 96,000 BTC to unidentified addresses. Later, the Kraken exchange reported receiving some of Mt. Gox's assets in BTC and BCH. Their distribution may take 7-14 days. In total, Mt.Gox will distribute 138,985 BTC worth ~$8.74bn.”
In an interesting turn of events, institutional investors appear to be the driving force behind the latest rally, while retail traders have turned bearish, according to analysts at Hyblock Capital.
“The market has experienced a notable upswing, with Bitcoin prices showing green for [five] consecutive days. This bullish trend was particularly pronounced with a ~3% increase on Sunday, followed by a substantial ~7% surge on Monday,” the analysts said. “These gains were accompanied by rising open interest, indicating that both longs and shorts were actively building positions.”
“Interestingly, retail investors have shifted their stance on BTC significantly,” they added. “Historically, the percentage of retail accounts in net short positions has hovered around 28-32%. However, we now see that 47% of retail accounts (white line) are shorting Bitcoin, placing this figure in the 96th percentile. This is a substantial deviation from the norm and suggests a high level of bearish sentiment among retail traders.”
“Several factors are contributing to an optimistic outlook for Bitcoin and the broader crypto market,” the analysts noted. “Federal Reserve Chair Jerome Powell's recent speech hinted strongly at rate cuts in September and throughout the rest of 2024. Additionally, the political landscape is turning favorable for crypto with the selection of pro-crypto candidate J.D. Vance as Vice President by Donald Trump. These developments create a conducive environment for crypto growth for the remainder of the year.”
“The current market dynamics are further interesting due to the behavior of retail traders,” the analysts said. “Despite the price increase, retail continues to open short positions, which paradoxically helps to push prices higher.”
“However, a closer look at the underlying data reveals some cautionary signs,” they noted. “While Coin-Margin CVD and Stablecoin-Margin CVD are increasing, Spot CVD is on a decline. This divergence suggests that the recent price rise might be driven more by speculative movements rather than genuine spot demand, which could lead to sharp and sudden price movements.”
“As we move forward, the interplay between retail sentiment and broader market catalysts will be crucial in shaping Bitcoin's trajectory,” they concluded. “The high level of shorts among retail traders, coupled with favorable macroeconomic and political factors, sets the stage for potential further price increases, albeit with the risk of volatility.”
Data provided by Coinglass shows that there is approximately $1.47 billion in short positions that risk being liquidated if Bitcoin can climb to $71,500.
At the time of writing, Bitcoin trades at $65,166, an increase of 1.11% on the 24-hour chart.
