Bitcoin Shows Strength with Shorting Expensive, FUD Losing Effect & GBTC Unlocks Winding Down
On Saturday, the price of Bitcoin went as low as $30,150 as the prices started tanking ahead of the weekend.
But before the weekend was over, the prices started pumping back up, with Bitcoin going above $35,000 late Sunday/ early Monday. As of writing, BTC/USD is trading around $34,200.
Ether rallied even more strongly, going as far as $2,085 after falling to $1,720 over the weekend. ETH 1.34% Ethereum / USD ETHUSD $ 2,606.07
$34.921.34% Volume 22.04 b Change $34.92 Open $2,606.07 Circulating 116.95 m Market Cap 304.77 b 8 h Bitcoin Drops Under $40k While Ether Stands its Ground at $2,600 Amidst NFT Craziness and Ahead of EIP-1559 Activation 2 d MSTR Stocks Are A “Leverage Long” Bet on Bitcoin, says MicroStrategy CEO Michael Saylor 2 d Bitcoin and Ether Print Green Candles for 10 Consecutive Days, OI on FTX & CME Rises Sharply & Faster than Binance
With weekend weakness followed by strength in the new week becoming regular and traders and investors started to act on it, the recovery moved earlier.
Another way selloffs end – when expectations become obvious.
Last 4 weeks “sell Friday, buy Sunday night” has worked. Now buying starts Sun morning to front run, next will be Sat night, then it’ll just be Friday.
When market direction is a foregone conclusion it stops working. https://t.co/BwDiNUPoDx
— Jeff Dorman, CFA (@jdorman81) June 13, 2021
This latest up move came amidst shorting Bitcoin and crypto assets getting expensive as funding rates on perpetual contracts go deeply negative. It makes sense that now it’s bear’s time to get obliterated as bulls did over the past couple of months when funding rates were extremely high.
“The current bear market is, from a BTC funding perspective, even more extreme than the Mar-Apr 2020 bear market (i.e., derivatives traders more bearish now than then),” said trader and economist Alex Kruger.
This is actually the “first bull run we've had with a full on derivatives lead price discovery,” noted trader CL of eGirl Capital.
This is why the top this time at around $65k was different and why “as BTC grows, macro tops are likely to be smoother than a vertical x2 followed by -40% moves.”
“When market is convinced bullish, longs that build up simply become astronomical, market pumping vertically against all these people who would take profit become unfeasible,” he added.
Shorting is getting expensive to fund pic.twitter.com/ivfc1q10Se
— Jonathan Cheesman (@jon_ftx) June 27, 2021
“Only rational people shorting now using perps are short-term bears. Panic is not rational,” Kruger added.
Even the FUD is losing its effect with JPMorgan saying, “the crackdown on mining operations in China should be considered as positive for bitcoin over the medium term as it accelerates a shift away from China’s high share in bitcoin’s hash rate, reducing concentration.”
Adding to Bitcoin’s strength is the lack of any unlocking Grayscale Bitcoin Trust (GBTC) shares for about a month. The discount on GBTC is also slowly shrinking, currently at 11.73%.
No $GBTC unlocks for a month now this should be fun
— 🐵👑 (@loomdart) June 28, 2021
Starting July 17, some unlocks will happen with the biggest one, 16.24k BTC, on July 18th; however, “Its post 6 months from Jan 1st so it's not the immediate dumpers pool so imo no way near as much of a concern,” said Loomdart.
With private placements in GBTC discontinued since March, no more “unlocks” will be vesting post-September as per Grayscale’s six-months lock-up rule.
While the crypto market looks good for the JPMorgan Chase & Co. team, including Josh Younger and Veronica Mejia Bustamante, the near-term setup is “challenging.”
According to them, recent cryptocurrency sales were made to cover losses and that “there is likely still an overhang of underwater positions which need to be cleared through the market.”
Still, stability in the Bitcoin futures market is a positive factor, alongside the possibility of increased production costs as China’s crackdown pushes Bitcoin mining abroad, said JPMorgan strategists.
So while the “cryptocurrency market shows signs that it is not yet healthy, it does also appear to be beginning the process of healing,” they wrote.