Simply put
- Bitcoin jumped over 6% on Thursday, surpassing $117,500, primarily due to the liquidation of short positions amounting to more than $1 billion.
- Experts suggest that this rally might be temporary, with derivatives pointing towards a lack of demand in the spot market.
- Even with this upward movement, funding rates stayed low, indicating a heavy reliance on orders and suggesting that the momentum may fade without fresh inflows.
Bitcoin is certainly on an upward trend.
But the real question is whether this growth is sustainable, and how are more experienced traders responding to the profit surge above $117,500 on Thursday?
Analysts have noted some concerning signs in the derivatives market. Just recently, it seems that more than $1.58 billion was in open profits.
A staggering $963 million of that amount involved short positions, which reveals just how off-balance sellers were during the Thursday spike. This forced liquidation significantly reduced open positions and contributed to notable declines in open interest.
Open profit refers to the total number of unresolved derivative contracts, including both futures and perpetuals.
Bitcoin is seen as “vulnerable,” according to Wenny Cai, co-founder and COO of a crypto derivatives platform, because of a lack of fresh inflows.
Data from Coinglass shows that Bitcoin’s aggregated spot order book reflects Cai’s cautious outlook.
Since early July, this order book has been heavily requested, suggesting that the recent price increase is more a result of future trading activity rather than actual demand in the spot market.
Cai further adds that the prevailing funding rates remain low, indicating only “mild bullishness” without signs of overheating. She anticipates a decline in momentum unless there’s a new wave of investment.
Bitcoin’s recent gains appear to coincide with signs of a weakening U.S. economy and a declining dollar. This year, the dollar has dropped 10.8% against a basket of leading currencies, with the DXY index hitting its lowest point since early 2022.
A weaker dollar often results from slow monetary policy and has historically increased risk appetite among investors, enhancing Bitcoin’s appeal.
As prices are quoted in dollars, Bitcoin’s value can climb if the dollar weakens. Some suggest that this ongoing dollar downturn, influenced by inflation or quantitative easing, bolsters Bitcoin’s standing as a digital gold alternative.
Regardless, Georgii Verbitskii, the founder of a DeFi platform, mentioned that Bitcoin’s rise above $112,000 is promising, pointing to an anticipated upward trend into summer and early fall.
“We’re currently observing strong positions in the options market,” Verbitskii noted. “When Bitcoin reached $113,000, there was a significant focus on $115,000 and $120,000 strike calls on Deribit.”
Verbitskii highlights the bullish market sentiment, with increasing interests in contracts set for September and December at $150,000.
