Markets
6 Factors Fueling the Current Recovery
The cryptocurrency market has demonstrated a strong recovery after a period of significant selling pressure and market uncertainty. Recent developments indicate a potential recovery with Bitcoin (BTC) leading the charge. These include the end of the German Bitcoin sell-off, Spot Ethereum ETF S-1 approval, whale accumulation, among others.
1. Bitcoin sell-off ends in Germany and global tensions
Michaël van de Poppe, an analyst at Ceyroi, recently highlighted that “Germany is done selling its #Bitcoin.” This extensive liquidation, totaling approximately $3.5 billion since June 19, has been fully absorbed by the market. Despite this massive liquidation, the price of Bitcoin remained stable at $58,000 at the time.
Now the BTC Price is approaching $63,000, marking a recovery. Furthermore, Van de Poppe also noted the growing global uncertainty following an assassination attempt on former President Trump. He suggests that such an environment could be conducive for Bitcoin to gain upward momentum. Furthermore, it could also positively influence the overall cryptocurrency market.
2. Spot Ethereum ETF and institutional moves
The market is also excited by the imminent approval of an Ethereum ETF. Grayscale, a major investment firm, has announced that July 18, 2024, will be the record date for the initial creation and distribution of shares of the Grayscale Ethereum Mini Trust. This distribution will see 10% of the Grayscale Ethereum Trust’s (ETHE) Ether holdings transferred to the ETH Trust.
Grayscale’s confidence in ETF approval this week added to the positive sentiment. The ETH Trust intends to list on NYSE Arca under the ticker symbol “ETH,” pending regulatory approval. Additionally, last week, all eight Ethereum ETF The applicants have submitted updated S-1 filings as requested by the SEC. This development also increases the chances of approval.
3. Cryptocurrency market analysis and bullish momentum
Cryptocurrency analytics firm IntoTheBlock noted: “Bitcoin has reclaimed the $62K support level after a strong weekend. While resistance is strong above, sufficient bullish momentum could stave off selling pressure.” This rebound from a crucial support level is significant, indicating strong buying interest and potential for further price appreciation.
CryptoQuant highlighted the challenging conditions for Bitcoin traders. The analytics firm noted that “Bitcoin traders are facing a tough market with negative margins at -17%, the lowest since the FTX collapse.” According to historical trends, such low margins usually precede market bottoms. This suggests a possible recovery phase, which was witnessed in the crypto market today.
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4. Whale activity and miners’ capitulation
Notable whale activity also influenced the market. TRON founder Justin Sun withdrew 14,436 ETH worth approximately $45.5 million from Binance. This indicates a bullish stance on the upcoming ETF approval, igniting optimism in the market. Additionally, XRP whales snapped up over 100 million XRP tokens amid rumors of a settlement in the Ripple vs. SEC case.
Bitcoin Miner Capitulation, Source: Quinten Francois | X
Miner capitulation, a historical precursor to Bitcoin price recoveries, has been significant. The Bitcoin True Hashrate Drawdown percentage recently reached 7.6%. This is identical to levels seen during Bitcoin’s $16,000 valuation amid the FTX collapse. 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 emphasized the recent buying trends among U.S. whales on Coinbase, suggesting that additional funds may flow into Spot Bitcoin ETFs during the trading days. Earlier last week, these ETFs witnessed $1.1 billion in inflows, further solidifying a rally. Furthermore, BTC Whales
raised $4 billion in BTC last week.
5. Short liquidations and market dynamics
The market recovery saw substantial short liquidations totaling $100.79 million, according to Coin Glass. This figure 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, it also introduces a layer of uncertainty as traders can manipulate the market once it peaks.
From a psychological perspective, the market seems primed for a recovery. Participants have gone through a considerable period of adjustment, experiencing fear and frustration, which often sets the stage for a recovery. However, Ali Martinez, a popular cryptocurrency analyst, advised caution.
He noted, “If you’re getting in late, beware! #Bitcoin could retest the breakout zone at $59,200 before reaching the $63,800 target.” However, BTC’s recovery beyond $63,800 is imminent following the slight pullback. This also sets the stage for a bullish momentum in the broader crypto market.
6. Fed rate cut probability in September above 90%
Signals from the Federal Reserve suggest a high chance of an interest rate cut, which could have a substantial impact on the cryptocurrency market. Bloomberg Analyst Mike McGlone predicted the Fed will cut interest rates following a slowdown in U.S. stock markets.
Looking at 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 Producer Price Index (PPI) data showing persistent inflation, the CME FedWatch The tool indicates a 90.3% probability of a rate cut in September. Lower interest rates usually lead to a weaker US dollar and increased investor interest in alternative assets like crypto.
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