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Traders Bet $2B against Bitcoin (BTC) amid Worst Crypto Crash in 2-Years
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Key Points:
- Bitcoin (BTC) price crashed to a 6-month low of $49,111 on Monday Aug 5, reflecting 30% losses in the last 7 days
- Amid cascading liquidations, the active leveraged BTC LONG contracts has fallen below $1 billion mark.
- Technical indicators suggest that BTC could must now hold the $55k support to maintain a neutral outlook.
In this article:
Bitcoin Market Analysis:
Bitcoin price crashed to a 6-month low of $49,111 on Monday Aug 5, reflecting 30% losses in the last 7 days, derivatives market data shows how SHORT traders are looking to further capitalize on the short-term market momentum.
Why is Bitcoin Price Down Today?
Bitcoin price declined 30% from $70,000 on July 29 to hit the $49,111 level during the morning trading session on Aug 5. Notably, this is the lowest that Bitcoin has traded in the last 6-months dating back to Feb 14.
While the bearish phase began after the underwhelming NFP report on Aug 2, with Bitcoin, Ethereum, XRP all entering double-digit losses over the weekend.
Several bearish catalysts responsible for the Bitcoin price downtrend have been identified as the global crypto market volatility intensified on Monday, August 5.
Firstly, on August 2, US Bureau of Labor Statistics published data on US unemployment claims for the July 2024.
According to the report, US Non-farm Payrolls rose by 114,000 in July. This hawkish NFP report came just days after the US Fed announced a rate pause on Jul 31. This Bitcoin investors into an instant selling frenzy, and within the next 24 hours BTC price fell by 6%.
Secondly, Warren Buffet’s Berkshire Hathaway sold off half off it Apple (AAPL) holdings for a cash pile of more than $277 billion. More so, Goldman Sachs increased their project likelihood of a recession in the US economy from 15% to 25% after the latest NFP data on Aug 2, showed increase unemployment.
Elsewhere, a major crypto trading firm, JumpCrypto, has also been spotted selling off over $277 million worth of ETH in the last 24 hours, further amplifying the bearish sentiment across the crypto markets.
These major events, have sparked major fears, spooking investors into selling-off their riskier assets. In effect, with Bitcoin and ETH experience intense sell-pressure, the crypto market shed over $750 billion from its total valuation amid cascading liquidations.
SHORT Traders Deploy Another $2 Billion Leverage
Bitcoin price has succumbed to 30% losses over the past week, losing key support levels in the process. Notably this is Bitcoin’s worst weekly timeframe performance since the FTX exchange collapse back in 2022.
Looking ahead, market data shows more worrying signals, with bear traders now looking to further capitalize on the gloomy market sentiment.
Coinglass chart below tracks the balance of active leveraged LONG positions and SHORT contracts currently listed for BTC. This provides direct insights into how majority of investors’ short-term outlook on Bitcoin price momentum.
Looking at the chart above, we see that after the 30% losses in the last 7-days, majority of BTC LONG traders have closed their positions. At the time of writing on Aug 5, there are only $905.4 million worth of active BTC LONG contracts, compared to $2.04 billion active SHORT positions.
This $1.1 billion shortfall means that Bitcoin bears are growing more confident, applying more leverage on their SHORT positions. Meanwhile, the LONG traders’ tardiness and unwillingness to enter new positions could further skew the BTC market momentum to the bears advantage in the week ahead.
As bears trader increase leverage SHORT positions the could amplify profits if BTC price declines further. Without a major uptick in demand, Bitcoin price could slide toward the $45,000 level.
BTC Price Forecast: SHORT Traders Eyeing $45k Retest
After 5 consecutive days of losses, Bitcoin price fell below $50,000 on Aug 5, and is now approaching another critical sell-off zone.
The Donchian Channels (20, 0) on the daily chart show a sharp decline, with the price touching the lower boundary at $49,111, emphasizing the strong downward momentum.
The Relative Strength Index (RSI) (14, close) stands at 22.62, indicating that BTC is in deeply oversold territory. This combination of technical indicators suggests that bearish sentiment is prevailing.
Over the past seven days, Bitcoin has plummeted by approximately 30.07%, underscoring the intense selling pressure. However, data shows Immediate resistance is seen at the middle Donchian Channel, around $59,563.87.
A break above this level would be needed to alleviate some of the bearish pressure. However, given the current market sentiment, a quick recovery seems unlikely without a significant influx of buying interest.
The RSI below 30 reinforces the bearish outlook, suggesting that the market is currently dominated by sellers. The key support level to watch is $45,000, a psychological and historical support area. If Bitcoin breaks below $49,000, it could quickly retest the $45,000 level, as short traders might capitalize on the ongoing downtrend.
About the Author
Ibrahim Ajibadeauthor
Ibrahim Ajibade Ademolawa is a seasoned research analyst with a background in Commercial Banking and Web3 startups, specializing in DeFi and TradFi analysis. He holds a B.A. in Economics and is pursuing an MSc in Blockchain.
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