Bitcoin’s Weekend Weakness: Yields Crash and Go Negative, OI Is Still Halved From Peak
While gold is getting crushed down 8.14% this month while the US dollar has soared to 92.4, aiming for a 2021 high of 93.43.
Right before the weekend, Bitcoin has dropped under $35,000 and is now aiming for $36,000.
Earlier this week, BTC’s price surged above $41,000, an increase of more than 30% from the previous week’s low of $30,000. But before even the week is over, the price has already lost 15.7% of its value.
Ever since the deep sell-off on May 19, the cryptocurrency has been trading sideways and remains in a crab market.
This week’s weakness came after the Federal Reserve started talking about tapering earlier than expected, with two hikes in interest rates coming in by 2023. Central bank turning hawkish has sent the prices in stocks crashing as well along with the yield on 10-year bonds.
Look at the bright side. Powell has a tendency to crash markets at the FOMC and pump markets at testimonies before congress. He will be testifying before congress on Tuesday.
— Alex Krüger (@krugermacro) June 19, 2021
The dollar is the only winner as it soared to 92.4, up from 89.5 late last month. 93.43 is greenback’s 2021 high set in late March.
Commodities are also getting crushed, with gold falling to $1,760 per ounce. The bullion is now down 8.14% this month after rallying 14.3% for two months straight in April and May.
For the past few months, we have been seeing the price of gold, the traditional store of value, and digital gold, bitcoin, moving in opposite directions. This actually started towards the end of 2020 when gold funds reported an outflow while the leading cryptocurrency saw increased interest from investors and inflows.
This is going to be interesting pic.twitter.com/8BAW5NIrZM
— TraderSZ (@trader1sz) June 17, 2021
Bitcoin is basically gaining traction as the latest store of value and trying to capture precious metal’s market share.
This week, a German national weekly newspaper described bitcoin as “The Clever Gold.” One of the most popular news sources in the country, Die Zeit, said Bitcoin “is a new political movement of radical decentralization.”
In the meantime, the latest weakness in price has funding rates on Bitcoin perpetual contracts going negative on most of the cryptocurrency exchange with 0.01% the highest.
Back in February, 7-day APY went as high as just over 46% on Binance and above 128% on Bybit. In March, this spike again to 32% and 89% on Binance and Bybit respectively, and then 40.7% and 60.13% in April. As of writing, it is -0.06% on Bybit and -1.04% on Binance.
Updated Bitcoin Energy Value based on latest mining hardware energy efficiency data.
Found an interesting pattern for the bulls…
Like clockwork, every post-halving summer, we retrace the pump to ~40% premium on Energy value.
From there, premium-to-value skyrocketed. pic.twitter.com/2Wsy9d9Gtp
— Charles Edwards (@caprioleio) June 18, 2021
This is healthy for the market after experiencing high rates and yields for a long time. Spiking yields is actually a sign of lack of money, as they represent an “insane amount of leverage demand,” with billions of dollars sitting in quarterlies with *locked in* high annual rates, explained trade CL of eGirl Capital.
“When the most liquid interest rate market (huobi's quarterlies) starts moving up aggressively as more open interest rush in, you can tell there's no more money left on the sidelines because literally no one even had money left to even get the 30% or 40% for free.”
According to CL, Moreover, with yields on centralized exchanges already in negative, soon on-chain yields will be negative too, and “all defi protocol token holders will actually have to pay the protocol every year to continue bag holding their negative revenue bags.”
Meanwhile, open interest in the market has a long way to go, currently at just $12.61 billion, down from a $27.68 billion peak in mid-April. But the good thing is Grayscale Bitcoin Trust unlock is soon coming to an end. Discount on GBTC is currently around 14.44%, recovering from a 21.23% low last month, albeit slowly.
We are so so close pic.twitter.com/tQ6eus21sr
— loomdart (@loomdart) June 18, 2021
Amidst this, Michael Burry of “the Big Short” fame warned about losses “the size of countries” in the event of crypto and meme-stock declines.
“All hype/speculation is doing is drawing in retail before the mother of all crashes,” Burry wrote in now-deleted tweets.
“When crypto falls from trillions, or meme stocks fall from tens of billions, #MainStreet losses will approach the size of countries. History ain’t changed.”