btc analisis

Bitcoin soars over $10,000, market liquidates $75 Million short contracts

Bitcoin has always been under skepticism from many individuals but of late, it has made yet another staggering performance. The price of Bitcoin abruptly surged to $10,200, as it liquidated $75 million worth of short contracts.

The price of Bitcoin (BTC) rose to as high as $10,272 on July 26 in an unexpected weekend rally. It liquidated $74 million worth of long contracts on BitMEX alone, catching many traders off guard.

Reasons behind the price surge

There appear to be two main reasons behind the abrupt upsurge of Bitcoin from $9,700 to over $10,200:

1.) They are the liquidation of over-leveraged shorts and;

2.) traders taking profit from over-extended alternative cryptocurrencies (altcoins).

The hourly price chart of Bitcoin
Pic source: Tradingview.com

In addition to suffering pricing blows due to the economic fallout from the coronavirus outbreak, the virtual currency went through its third so-called halving on May 11, which cut the rewards given to those who “mine” bitcoin to 6.25 new coins from 12.5.

The “halving” has affected the supply side of bitcoin and increased the time needed for miners to find their break-even point. On Sunday, the cryptocurrency hit highs of $10,200.

Liquidation of Short-term contracts

When Bitcoin initially broke over $10,000, it triggered over-leveraged short contracts to become liquidated. When BTC reached $10,200, it caused a cascade of liquidations to occur, totaling $74 million.

Bitcoin has seen many phases when more than $50 million worth of short or long contracts gets liquidated. But for this to occur within a span of a few hours is less typical.

The mass liquidations of long contracts at $10,000 also suggest that the $10,000 to $10,200 remains as a heavy resistance area. As soon as BTC hit $10,200, the price dropped below $10,000, marking a short-lived rally.

Altcoins – the stats

Analysts now expect traders to target $10,500, and above this level price estimates ranging from $11,000, $14,000 and even $16,000 have been thrown about. 

While this is exciting for bulls, it’s important to note that Bitcoin price has rallied 12.76% since rising from $9,142 on July 21 and the price has yet to retest underlying support around $9,450. 

Crypto market weekly price chart
Crypto market weekly price chart. Source: Coin360

The simultaneous rejections of major altcoins and the price surge of Bitcoin suggest that traders took profit from recent altcoin rallies. As traders moved their altcoin gains to Bitcoin, it possibly triggered a BTC uptrend, while altcoins declined.
ETH, as an example, rose from $247 on July 23 to $322 on the day’s peak, recording a 30% gain. Despite the strong sentiment around altcoins, investors are possibly taking a more cautious approach by hedging their gains. Above $317 traders will have set their sights on the June 26 high at $367, but given that the altcoin has rallied 40% since July 21 there is also a possibility that traders booking profits will lead Ether price to correct. 

As the Bitcoin price moved higher a number of the top-20 altcoins saw marginal gains. Crypto.com Coin (CRO) rallied 5.61%, Monero (XMR) added 3.53%, and Bitcoin SV (BSV) gained 2.18%. 

According to CoinMarketCap, the overall cryptocurrency market cap now stands at $306.6 billion. Bitcoin’s dominance index currently at 61.4%.

Most valuable stats – summary

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1.) The biggest cryptocurrency by market value is trading near $9,970 at press time, representing a 4% gain on a 24-hour basis and 8% gains on a week-to-date basis.

2.) “The DeFi-led surge in Ethereum’s ether token, the second-largest cryptocurrency, seems to have spilled over into the bitcoin market,” said John Ng Pangilinan, managing partner at Singapore-based Signum Capital.Ether’s price rose to a 13-month high of $319 early Friday and is currently trading at $310 – up over 9% on a 24-hour basis and 30% this week alone.

3.) The token, which powers Ethereum’s blockchain, has gained 140% this year, leaving bitcoin, up 40% on a year-to-date basis, far behind.

4.) Bitcoin is outshining gold, which has appreciated by 25% this year.

5.) However, gold is trading close to its record high of $1,920 reached in 2011, while bitcoin is still down 50% from its lifetime high of $20,000 hit in December 2017.

6.) The U.S. Federal Reserve’s massive liquidity injections and the negative yield on the inflation-adjusted US bonds look to have powered gains in gold, an inflation-hedge.

7.) Bitcoin, however, struggled to draw hedging bids over the past two months and was locked in the narrow range of $9,000 to $10,000.

8.) Some investors expect bitcoin to chart stronger gains in the near future as the cryptocurrency has breached a bearish trendline falling from December 2017 and June 2019 highs.

Also Read : News Highlights From July 2020

Shaheer Ansari

Shaheer is passionate about living a life seeking un-ending knowledge, philomath, as you may think of him. He's a student of Finance and a keen observer of Business and Indian-Political scenario who takes pleasure to pen down his views and opinions on the same. As his guiding mantra to life, ‘Come what may , life goes on’ helps.

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