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6 Factors Fueling Today’s Recovery
The cryptocurrency market has shown a strong rebound after a period of significant selling pressure and market uncertainty. Recent developments point to a potential recovery with Bitcoin (BTC) leading the charge. These include the end of Bitcoin liquidation in Germany, the approval of Spot Ethereum ETF S-1, accumulation of whales among others.
1. The End of the Bitcoin Sell-Off in Germany and Global Tensions
Michaël van de Poppe, an analyst at ceyroi, recently pointed out that “Germany has finished selling its #Bitcoin”. This widespread sell-off, totaling around $3.5 billion since June 19, has been completely absorbed by the market. Despite this massive liquidation, the price of Bitcoin has remained stable at $58,000 at the moment.
Now the BTC Price is approaching $63,000, marking a recovery. In addition, Van de Poppe also noted the growing global uncertainty following an assassination attempt on former President Trump. He suggests that this environment could be favorable for Bitcoin to gain upward momentum. Furthermore, it could also positively influence the overall cryptocurrency market.
2. Spotting Ethereum ETFs and Institutional Moves
The market is also buoyed by the upcoming approval of an Ethereum ETF. Grayscale, a well-known investment firm, has announced that July 18, 2024 will be the record date for the creation and initial distribution of shares of the Grayscale Ethereum Mini Trust. This distribution will see 10% of the Grayscale Ethereum Trust’s Ether holdings (ETHE) transferred to the ETH Trust.
Grayscale’s confidence in ETF approval this week has contributed to the positive sentiment. The ETH Trust aims to list on the NYSE Arca under the ticker symbol “ETH,” pending regulatory approval. Additionally, last week, all eight Ethereum ETFs applicants have filed updated S-1 statements as required by the SEC. This development also increases the likelihood of approval.
3. Cryptocurrency Market Analysis and Bullish Momentum
IntoTheBlock, a cryptocurrency analytics firm, noted: “Bitcoin has reclaimed the $62k support level after a strong weekend. While resistance is strong above, sufficient upside momentum can prevent selling pressure.” This reclaiming of a crucial support level is significant, indicating strong buying interest and potential for further price appreciation.
CryptoQuant highlighted the difficult conditions for Bitcoin traders. The analytics firm noted that “Bitcoin traders are facing a difficult market with negative margins at -17%, the lowest since the FTX crash.” According to historical trends, such low margins often precede market lows. This suggests a possible recovery phase, which has been observed in the cryptocurrency market today.
Read also: Satoshi-era whale moves 1000 Bitcoins: What’s happening?
4. Whales’ Activity and the Miners’ Capitulation
Significant whale activity has also impacted the market. Justin Sun, founder of TRON, withdrew 14,436 ETH worth around $45.5 million from Binance. This indicates a bullish stance on the upcoming ETF approval, sparking optimism in the market. Additionally, XRP whales have scooped up over 100 million XRP tokens amid rumors of a settlement in the Ripple vs. SEC case.
Bitcoin Miners’ Capitulation, Source: Quinten Francois | X
Miner capitulation, a historical precursor to Bitcoin price rebounds, has been significant. Bitcoin True Hashrate Drawdown recently hit 7.6%. This is identical to levels seen during Bitcoin’s $16,000 valuation during the FTX crash. This capitulation implies that weaker miners are exiting, reducing the market’s selling pressure and paving the way for a potential price recovery.
CryptoQuant further noted that recent buying trends among US whales on Coinbase suggest that additional funds could flow into Spot Bitcoin ETFs during the weekdays. Earlier last week, these ETFs saw $1.1 billion in inflows, further solidifying a rebound. Additionally, BTC Whales
accumulated $4 billion in BTC last week.
5. Short Liquidations and Market Dynamics
The market rebound saw substantial short liquidations, totaling $100.79 million, according to Coin glass. This amount significantly exceeded the $21 million in long liquidations. This dynamic creates buying pressure as traders mitigate losses by buying back their short positions, potentially accelerating the recovery. However, this also introduces a layer of uncertainty, as traders can manipulate the market when it peaks.
From a psychological perspective, the market seems poised for a rebound. Participants have endured a considerable adjustment period, experiencing fear and frustration, which often pave the way for a recovery. However, Ali Martinez, a famous cryptocurrency analyst, advised caution.
He noted, “If you’re late, be careful! #Bitcoin could retest the breakout zone at $59,200 before reaching the $63,800 target.” However, BTC’s recovery above $63,800 is imminent after the slight pullback. This also sets the stage for bullish momentum in the broader cryptocurrency market.
6. Probability of Fed rate cut in September above 90%
Signals from the Federal Reserve suggest a strong likelihood of an imminent interest rate cut, which could have a substantial impact on the cryptocurrency market. Bloomberg analyst Mike McGlone predicted that the Fed will lower interest rates following a downturn in U.S. stock markets.
Considering historical trends, significant rate hikes between 2004 and 2006 were followed by the first rate cut in September 2007. Similarly, after the recent cumulative rate hikes of 525 basis points since the beginning of 2022, a rate cut is expected next September.
Despite June’s Producer Price Index (PPI) data showing persistent inflation, CME FedWatch indicates a 90.3% chance of a rate cut in September. Lower interest rates often lead to a weaker U.S. dollar and increased investor interest in alternative assets such as cryptocurrencies.
Read also: Bitcoin, Altcoins Take Center Stage as Market Eyes Ether ETF, Fed Chairman Comment, More