As a seasoned analyst with over two decades of experience in both traditional and digital markets, I’ve seen my fair share of market volatility. Today’s Bitcoin price drop is indeed intriguing, given the generally bullish sentiment surrounding recent macroeconomic data.
On Friday, Bitcoin‘s price experienced a surprising drop as the positive momentum that had been building in the previous 24 hours seemed to wane. Despite recent positive US economic data like the CPI inflation and retail sales report, which have sparked optimism among traders, they have become more bullish towards Bitcoin. Some investors think this might be the final opportunity to capitalize on a price dip.
Nevertheless, the surge in Bitcoin options expiration played a significant role in curbing its upward momentum. At the same time, the cryptocurrency market’s Fear & Greed Index decreased slightly from 29 to 27, indicating an increase in fear among investors.
Bitcoin Price Dropping Despite Macro Sentiment Improved
Lately, positive economic developments like a rise in American retail sales, along with a decrease in both Producer Price Index (PPI) and Consumer Price Index (CPI) inflation, have made investors more optimistic about the market. As a result, there’s speculation that the Federal Open Market Committee (FOMC) of the United States could soon initiate interest rate reductions, with many anticipating the Fed to start cutting rates in September.
Based on the data from the CME FedWatch tool, there is approximately a 71.5% chance of a 0.25 percentage point interest rate decrease in September, given the latest economic data. The data also suggests that the Federal Reserve might reduce rates by up to 1 percentage point this year.
On a personal note, I found myself in a rather stable position in the crypto market on Friday, as I share the widespread optimism among investors that this week will witness a robust recovery. Encouraging economic data such as inflation rates, jobless claims, and retail sales have been instrumental in propelling US stocks to record their strongest performance of the year during this week.
According to John Stoltzfus, Oppenheimer’s chief investment strategist, the Federal Reserve Chairman might be both verbally expressing and demonstrating his intentions, implying that he anticipates the central bank will implement three rate reductions by the end of the year.
What Is Causing Sudden Drop in BTC Prices
In simpler terms, the value of Bitcoin dropped unexpectedly in U.S. trading hours due to the unpredictability related to the end of a significant period for crypto trading (known as the crypto market expiry). Specifically, $1.4 billion worth of Bitcoin options expired today, and these options had a ratio favoring put options (options to sell) over call options (options to buy) by 0.83. The price at which most traders would experience losses if the market moved in either direction is currently set at $59,500, which is above the current Bitcoin price of $57,853. This suggests that many traders with positions in Bitcoin may have had their holdings liquidated (sold to cover their debts).
Additionally, it appears that the total open interest for Bitcoin futures contracts decreased by 1% within an hour on both CME and Binance. This suggests that traders have likely finalized their decisions to sell Bitcoin before the CME market closes today.
As a seasoned cryptocurrency trader with years of experience under my belt, I can confidently say that the liquidation data from the past 24 hours has been quite intriguing. With $210 million in crypto being liquidated within this period and $25 million just in the last hour alone, it’s clear that the market is experiencing significant volatility.
On the 1-hour chart, the current price is encountering resistance at a downward sloping line. A minor nudge might tip the scales in favor of the buyers. Yet, it’s more likely that we’ll see a drop. CoinGape’s BTC analysis predicts the price could dip to around $54,000.
According to a report from 10x Research, it’s predicted that Bitcoin may fall into a trading range of around $50,000 to $60,000. On the positive side, Bitcoin’s price is encountering significant resistance in the area between $60,000 and $61,000. Furthermore, concerns about potential Bitcoin sell-offs by the U.S. government and a resurgence of Yen carry trades among hedge funds are affecting Bitcoin’s current market movements.
Bitcoin’s price bounced back from approximately $57,000 yet remains under selling influence over the past day, as it is now being traded at $58,603. The price range for the last 24 hours was between $56,161 (low) and $59,348 (high). Notably, trading volume has risen by 9% in this same period.
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2024-08-16 17:45