Bitcoin traders experienced a rough time as the cryptocurrency dropped below $60,000, leading to the liquidation of over $150 million in long positions due to insufficient margins. Longs, or futures, are bets on price increases, causing losses for bitcoin’s long traders. The derivatives market has shifted from a bullish sentiment to a more neutral stance among traders after five weeks of fluctuations.
Traders are becoming more cautious and moving away from the risks associated with bitcoin, especially given the recent market conditions. This trend has been evident since June 7, when bitcoin saw a significant drop of over 16% from its peak of around $72,000.
Investor interest in bitcoin derivatives has dwindled, as seen in the decreasing bitcoin futures premium. This premium, which measures the price difference between Bitcoin derivatives and spot products, hit its lowest point on Monday. The indicator peaked at 16.5% on June 7 during the bullish rally but has been on a downward trend since then, reaching 8% on June 22, signaling a less bullish market sentiment.
As selling pressure mounts, Bitcoin put options (sell) have been on the rise, reaching their highest level in four weeks, while call options (buy) have decreased in number. The put-to-call volume ratio has also dropped significantly to 35%, although it is still considered favorable compared to previous weeks’ ratios.
The decline in bitcoin prices can be attributed to a combination of macroeconomic and crypto-specific factors. The strong performance of the US dollar, increased investor interest in less risky assets like tech stocks, and other macroeconomic factors have contributed to the downward pressure on bitcoin. Additionally, the release of millions of dollars worth of bitcoins by the German government, as well as the news of Mt. Gox returning 140,000 bitcoins to creditors, have impacted market sentiment.
Furthermore, miners selling off their holdings to offset the reduction in mining rewards following the Bitcoin halving event has also played a role in the cryptocurrency’s lackluster performance.
Overall, the recent developments in the derivatives market and the broader cryptocurrency space indicate a shift in sentiment among traders. As market conditions continue to evolve, it will be crucial for investors to stay informed and adapt their strategies accordingly to navigate the volatility in the cryptocurrency market.