Bitcoin has been in the gutter this week, leaving traders frustrated as the price looks more likely to drop than bounce back.
After a weekend that showed promise, the market closed with a whimper, and now Bitcoin is sitting in a funk, uninspiring everyone who’s been watching the charts, because while stocks managed to rebound after their August 5th crash, crypto has NOT.
So, what’s the deal? Why is Bitcoin acting like it’s had too many drinks at a party, just stumbling around without direction?
All eyes are on the United States Federal Reserve this week, as their annual Jackson Hole symposium kicks off. Everyone’s waiting for Fed Chair Jerome Powell to spill the beans on what’s coming next for the economy.
Are we going to see interest rates drop in September? Traders are holding their breath, but until then, there’s a growing fear that Bitcoin might take another nosedive, dragging the whole crypto market with it.
Where are the bulls?
Bitcoin hovering around $50,000 has got everyone on edge. Analysts are saying that a tumble below that mark is in play, and while the miners are playing it cool, there’s this nagging sense that things might go south.
Let’s talk about the derivatives markets for a sec—CryptoQuant spotted something unusual recently. Funding rates have been hitting negative territory, something we haven’t seen in almost a year.
EgyHash, a contributor at CryptoQuant, pointed out that Bitcoin funding rates on Binance have been in the red for three straight days.
He added that “the funding rates of Bitcoin on Binance have been negative for the third consecutive day, reaching levels not seen since October 2023.”
This means that short positions are taking over the perpetual market. In simple terms, traders are betting that Bitcoin’s price is going to drop, and they’re doing it with some serious conviction.
This could mean trouble, but it also sets the stage for what’s called a “short squeeze.” If everyone’s betting on the price dropping and suddenly the price goes up instead, those short positions get crushed, and the price shoots up even more.
But hey, don’t count on it just yet. The market is still leaning towards more downside, so we’ll have to see how this plays out.
Miners stay cool
While all this drama unfolds, what are the miners doing? Surprisingly, not much. Miners usually start selling off their Bitcoin stash when things get rough, but since the end of July, they’ve been keeping their cool.
Crypto Dan, another voice at CryptoQuant, summed it up, saying:
“Miners have been selling their Bitcoins through over-the-counter transactions and exchanges until recently, but since the end of July, they have shown no signs of selling.”
This is a bit odd, especially when you consider that the current Bitcoin price is flirting dangerously close to their production costs.
MartyParty chimed in on the situation with “Miners Reserves are now at January 2021 levels.” Basically, miners are sitting on a pile of Bitcoin, and it looks like their recent selling spree is done for now.
But this calm could be the eye of the storm. If the price keeps dropping, they might have no choice but to start offloading again, which could push the price even lower.
