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Vaccine News Strikes Blow to Safe Haven Assets; Potentially Impacting Bitcoin

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  • The global stock markets are rocketing today on news that a vaccine that would put an end to the ongoing pandemic has 90% effectiveness
  • This news signals that it may only be a matter of months before things start going back to normal, which means a reduction in government spending and economic turbulence
  • Naturally, this is a bad thing for safe haven assets, with today’s news sending the price of gold nosediving
  • Bitcoin has seen some downwards momentum as well, although it is mostly consolidating around the price at has been at for the past few days
  • If BTC truly is a safe haven asset that trades more like gold than it does equities, then this news could strike a serious blow to its strength

Bitcoin is still trading within the mid-$15,000 region following a period of weakness throughout the past couple of days.

Following its rejection ta $16,000, bears sent its price plunging to lows of $14,400. At this point, it was able to reverse its descent and rally all the way up towards the upper-$15,000 region.

It has been consolidating ever since and may now be on track to see its volatility start ramping up as the global markets start moving based on the vaccine news.

Vaccine News Sends Stocks Flying; Strikes Blow to Gold and Bitcoin

News of Pfizer’s highly effective vaccine has moved the markets, sending stocks flying while safe haven assets trend lower.

While the benchmark stock indices all rallied multiple percentage points in their pre-market trading hours, gold’s price nosedived – seeing one of the latest single-day selloffs it has seen in quite some time.

Bitcoin has shown signs of being correlated to both stock and gold on separate occasions, making it unclear how this news could impact its price action. It has declined slightly today.

Trader: Vaccine News Possibly Bad for “Store of Value” Narratives

One trader hedged his Bitcoin long exposure after the news broke, noting that it could prove to be highly negative for safe haven narratives.

“Short hedged my BTC 1:1 on vaccine news. Gold dumped so hard it makes me think it’s bad for store of value narratives. Not net short just protected for spot exposure.”

Image Courtesy of SalsaTekila. Source: Assorted Charts from TradingView.

The coming few days should shine a light on whether or not Bitcoin’s independent technical strength will be enough for it to dodge the impacts of this news.

Featured image from Unsplash.
Charts from TradingView.





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Bitcoin

Bad call? Bitfinex bears closed a block of Bitcoin shorts before the drop below $32K

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Bitcoin price is still in a rut, trading near $33,000 and trapped in a downtrend that just seems to get worse with the passing of each day. As the price slumps, analysts have consulted with several technical and on-chain metrics to explain the price collapse, but none of these have picked up on the exact reason. 

One area of interest has been the sharp rise in short positions at Bitfinex in the past week. Traders are placing exaggerated importance on these Bitcoin (BTC) margin shorts as if they are predictors of the current market crash. Still, as Cointelegraph previously reported, analysts forget that Bitcoin margin longs are usually much larger.

On June 18, longs outnumbered Bitfinex shorts by at least 22,800 BTC, but 87% of the short positions were closed before June 22. Currently, margin longs are 43,850 BTC higher than the amount shorted.

While those shorts are usually savvy traders, it is unlikely that they knew in advance that Chinese banks would prevent their clients from engaging in activities involving crypto trading or mining.

More importantly, these bearish positions were built while MicroStrategy was buying $500 million in Bitcoin after a successful senior secured note private offer. To make things worse, Michael Saylor’s business intelligence firm announced the intention to raise another $1 billion by selling stocks to buy Bitcoin.

Let’s take a look at how these courageous shorts fared.

Bitfinex margin shorts (blue) vs. Bitcoin price in USD (orange). Source: TradingView

On June 6, shorts increased from 1,380 to 6,700 at an average price of $36,150. Three days later, another 12,180 shorts were added when Bitcoin was trading at $37,050. Lastly, between June 14 and 15, shorts increased 6,000 to a 25,000 peak while Bitcoin averaged $40,100.

By looking at the Bitcoin prices when those short position increases took place, it is reasonable to assume that the 23,500 contract increase (green circles) had an average price of $37,625.

Related: Traders search for bearish signals after Bitcoin futures enter backwardation

Traders closed positions before BTC crashed bel$32,000

These short positions were steadily closed over the past three days when Bitcoin was already trading below $37,000. However, 17,000 short contracts had already been closed by the time the price plunged below $33,500. Therefore, it is implausible that the average price was below $34,500.

No one would complain about gaining 8%, shorting the market to generate a $73 million profit. However, it is essential to note that on June 16, when Bitcoin reached $40,400, these shorts were underwater by $65 million.

This analysis shows how even highly professional traders can go deep underwater. There’s no way to know if this trade would have been profitable had the crackdown on China not aggravated Bitcoin price or if MicroStrategy managed to raise the $1 billion before the price drop.

If anyone still believes in market manipulation, at least there’s comfort in knowing that pro traders can face drastic losses as well. However, unlike us mortals, whales have deep pockets and patience to withhold even the most rigorous thunderstorms.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.