Bitcoin Sells Off on Bearish Sentiment, Yellen Worries
Bitcoin's price is down around 5.6% in the past 24 hours as some Asian traders are bearish in the short term and have concerns that the new Biden administration in the US will try to curb the use of cryptocurrencies.
Profit-taking occurred in the spot market during Asian market hours after Bitcoin failed to consolidate around the record high of $ 40,000 last week. Short positions in the derivatives markets grew, led by institutions and large Bitcoin holders known as whales.
Data from Skew shows that Bitcoin's ongoing swap funding on major derivatives exchanges, an indicator of the cost of maintaining a long position in the derivatives market, has declined today, suggesting that demand for oriented deals has declined .
Related Topics: Market Wrap: Bitcoin briefly dips below $ 33.5,000 while Ether calls dominate options
At the time of going to press, Bitcoin was trading at $ 35,008.58, according to CoinDesk 20 data.
The sell-off also resulted in major fixes for other cryptocurrencies on CoinDesk 20, including Ether, Stern, XRP, and Chain Link.
Despite some long-term positive assessments that Bitcoin price could reach as high as $ 100,000, analysts and traders told CoinDesk that large Bitcoin holders have become more bearish in the short term, especially after Ether hit the second largest cryptocurrency by market cap, all-time high on Tuesday .
"Sentiment in Asia was very bearish, at least for a short time, after seeing the retail side get too optimistic," Alex Zuo, vice president of China-based crypto wallet Cobo, told CoinDesk. He said the recent rise in the price of alternative cryptocurrencies reflected increased interest from retail investors, who are typically more sensitive to price fluctuations.
Related: Is Janet Yellen Bitcoin The Biggest Enemy Or The Biggest Capital? Yes
As a result, institutions and Bitcoin whales are less likely to bring fresh capital to the market. Said Zuo. Instead, they either take profits by selling on the spot market or arbitrate by shorting out the spot market.
Data from the on-chain analytics company CryptoQuant also indicate selling pressure on the spot market. The whale ratio on exchanges, which measures the relative size of the top 10 inflows to total inflows for all exchanges, has risen above 0.85 since last week, meaning more large bitcoin holders are depositing bitcoin in the exchanges. This is seen as a sell signal as it could mean that large Bitcoin holders are trying to get their inventory on the market.
According to the CEO of CryptoQuant, the prices prevent a drastic drop in prices as the unloaded bitcoins are picked up by the buyers at a certain exchange.
"If we didn't see any significant buying pressure from Coinbase Pro, I think Bitcoin would be bearish," said Ki Young Ju, CEO of CryptoQuant, in a tweet.
Ki told CoinDesk that an indicator to watch is the bitcoin outflow from Coinbase, usually a metric that implies an institution's bitcoin purchase through over-the-counter desks. Once significant bitcoin outflows occur from Coinbase, bitcoin price could rebound and even climb as high as $ 100,000, he said.
In the derivatives market, implied volatility-at-the-money has fallen sharply since it peaked earlier this month, according to data website Skew. The indicator shows investors' expectation of how turbulent prices will be in the next month. A decline usually translates into cheap options contract costs.
"Bitcoin put purchases in the past few days are finally taking their toll on the market, while implied volatility in the money has fallen significantly since the peak earlier this month," said Denis Vinokourov, research director at London-based prime brokerage Bequant . "Call selling was the dominant game today, however, and there is still a lot of open interest in contracts to end the month at $ 52,000, which should alleviate the bulls' concerns."
Grayscale's Bitcoin Trust's falling premium over net asset value is another negative sign of more selling pressure than buying, Cobo's Zuo added. The premium fell from a December high of 40.18% to 8.66% on Tuesday. Grayscale is owned by the Digital Currency Group (DCG), which also includes CoinDesk.
Another possible cause of the decline is U.S. Treasury Secretary Janet Yellen, who made negative comments on Bitcoin and other cryptocurrencies during her confirmation hearing on Tuesday.
During the hearing, Yellen suggested that President Joe Biden's administration could consider ways to restrict the use of Bitcoin and other cryptocurrencies to fund criminal activities, including terrorism.
Read More: Janet Yellen Says Cryptocurrencies Are A Problem With Terrorist Funding
"There is no doubt that [Biden] 's new regime will focus more on consumer protection than the previous one, which means more enforcement, stricter rules and the pursuit of more control over the markets," said Guy Hirsch, managing director for the USA at eToro said. "If regulators take an aggressive stance on Bitcoin, we could see a prolonged downtrend."
Bitcoin is selling on bearish sentiment, Yellen Worries
Bitcoin is selling on bearish sentiment, Yellen Worries
In this article
ETHUSD = X.
BTCUSD = X.
BTC = X.
Eager to Say ‘I Told You So,’ Paul Singer Warns of Trouble Ahead
The Real World Homecoming: New York Reopens Decades-Old Wounds for the Original Cast — Watch Trailer
Rep. Al Green scolds GOP over Equality Act: ‘You used God to enslave my foreparents’
Ted Cruz responds to John Boehner reportedly telling him to ‘go f— yourself’
Amelia Hamlin Responds to Blackfishing Accusations Over Recent Instagram Pic
While Chris Webber waits for the Hall of Fame, he's helping minorities in the cannabis industry