Market Turnaround: Bitcoin Rising as Elon Musk Tames Shorts

Cryptocurrencies rebounded on Wednesday as short sellers covered positions ahead of Tesla CEO Elon Musk’s appearance on The B Word Conference. Bitcoin was trading at around $32,000 at the time of writing and is up 8% in the last 24 hours. The sharp rise in prices reflects positive sentiment in an effort to reverse a month-long downward trend, driven largely by regulatory uncertainty.

At Wednesday’s B Word conference, Musk reinforced the bullish sentiment when he announced that SpaceX, one of the companies he founded, has bitcoin on its balance sheet. Musk also stated that he personally owns ether. The announcement contributed to the soaring prices of cryptocurrencies on Wednesday, with ether breaking above $2,000 for the first time since July 14.

Latest prices

cryptocurrency:

Bitcoin (BTC) $31684, +6.06%
Ether (ETH) $142.6, +8.29%

Related: Coinbase Commerce Adds Support for Dogecoin Payments

Traditional markets:

S&P 500: 4358.7, +0.82%
Gold: $1804.2, -0.34%
The 10-year Treasury yield closed at 1.293%, compared to 1.214% on Tuesday.

“We see that trading volumes have increased at the lower price levels, presumably because people are buying the dip,” said Kirill Suslov, CEO of the trading app. TabTrader, wrote in an email to CoinDesk.

It is also said that environmental concerns are beginning to subside as miners adapt their operations to reduce their carbon footprint. The result could encourage those larger investors who are waiting for an opportune moment to allocate money to cryptocurrencies, while fulfilling their environmental, social and governance (ESG) mandate.

“The mining crackdown in China has dramatically improved bitcoin’s environmental impact as miners move towards the world’s cheapest energy sources, which are more often than not renewable, and much older and more inefficient mining equipment has been taken offline. Alexandra Clark, a salesperson at GlobalBlock, wrote in an email to CoinDesk.

Related: Bitcoin Reclaims $30K As Macro Discussion Shifts From Inflation To COVID-19 To Growth

Not all analysts are convinced that bitcoin will remain higher.

“Bitcoin and the [wider] cryptocurrency basket have fully settled their overbought terms and are no longer stretched,” MRB partners wrote in an email to CoinDesk.

That said, this does not suggest that another rally is looming, it simply implies that cyclically speaking these digital currencies are less overbought with the cyclical trend now under downward pressure,” MRB wrote.

Positioning of Bitcoin Futures

The number of open positions in bitcoin futures continues to rise, and what appears to be an increase in short sellers indicates a gloomy market mood. That could bring volatility to the higher side, wrote CoinDesk’s Omkar Godbole.

According to data from blockchain analytics firm Glassnode, open interest, or the number of futures contracts traded that are out of balance with an offsetting position, reached the highest number since May 18. The dollar value of the number of open contracts remained stable at approximately $12 billion.

All things considered, the futures market is mainly bearish, leaving the door open for sharp corrective rallies in the price of bitcoin. When leverage is skewed to the bearish side, moving higher often results in forced close of short positions (trade square shorts). That, in turn, puts upward pressure on the cryptocurrency’s price, leading to exaggerated price movements.

Short capitulation?

Crypto sentiment has hit a new low, according to some “fear/greed” measures. It is likely that extreme fear caused short positions to cover positions as bitcoin fell below $30,000 on Tuesday.

“Many indicators are currently leaning towards a generally fearful environment,” Arcane Research wrote in a research note: on Tuesday.

Arcane warned that investors should be wary of the timeliness of some fear/greed measures, especially in traditional markets.

“Keep in mind what happened as fear loomed on March 12, 2020, when the… CNN Fear & Greed index reached an extreme low of 3′, Arcane wrote. The S&P 500 fell nearly 25%.

Shopping interest slows down

Google searches for bitcoin have declined since March 2020, coinciding with the cryptocurrency sell-off. The current level of relative search interest is not yet at the low of 2017, which “could be a sign that many retail investors and the general public were already aware of Bitcoin ahead of the recent price moves this year.” Coin Statistics wrote in a Tuesday newsletter.

“Institutional adoption is a big reason for Bitcoin’s recent successes in 2020/2021, which will not be easily inferred from Google’s search interest,” Coin Metrics wrote.

We see a similar scenario with the interest in Ethereum, which has benefited from the popularity of decentralized financing (DeFi) over the past year.

Resilience of Bitcoin Miners

Bitcoin Miners are still accumulating the cryptocurrency even though some miners are migrating to other places after China started cracking on crypto mining. “It is possible that the additional selling pressure from offline distressed miners is more than offset by the extraordinary profitability of the remaining operational miners,” Glassnode wrote.

Stablecoins in the spotlight

A day after stablecoin issuer Circle released more data on the assets behind USDC, other issuers are trying to highlight their transparency efforts.

Tether executives took to CNBC’s online show “Tech Check” to answer questions about USDT. An audit for Tether, issuer of the largest stablecoin, USDT, could be “months away, not years,” Stuart Hoegner, Tether’s general counsel, said in Wednesday’s conversation.

Meanwhile, Paxos released a breakdown of the reserves of its stablecoins, PAX and BUSD, for the first time: about 96% of the reserves were held in cash and cash equivalents, while 4% were invested in US Treasury bills as of June 30.

The revelations come at a time when regulators are increasingly paying attention to stablecoins. U.S. Securities and Exchange Commission (SEC) chairman Gary Gensler spoke to the American Bar Association on Tuesday said the prices of cryptocurrencies may be subject to securities laws.

Altcoin Collection

Elon Musk raises dogecoin price again: The price of dogecoin rose about 9% to $0.213 after Elon Musk repeated that he personally holds the cryptocurrency alongside bitcoin and ether at The B Word, before dropping it to $0.188 as of press time. However, of the 243 digital assets in the S&P Cryptocurrency Broad Digital Market (BDM) Index, dogecoin is not in.
Argentina province to issue its own stablecoin: The Argentine province of Misiones will issue its own native stablecoin. According to an official statement published on July 15 by the Misiones finance minister, the province has passed a law authorizing the stablecoin, allowing it to create a new financing and transaction tool. The project has been approved by the House of Representatives of Misiones and is being studied by an interdisciplinary team, including Adolfo Safrán, the province’s finance minister.

Relevant news

Core Science Plans to Go Public in SPAC Deal
BNY Mellon Follows State Street in Supporting New Crypto Trading Platform: Report
Bitstamp Adds Support for Euro-Backed Tether Stablecoin Amid Increasing Demand
Argo Blockchain Plans US Listing in Q3
US Patent Granted to Stablecoin Concept Backed by Government Debt

Other markets

Most digital assets on CoinDesk 20 ended higher on Wednesday. In fact, everything was in the green except dollar-pegged stablecoins.

Notable winners as of 9:00 PM UTC (4:00 PM ET):

aave (AAVE) + 11.84%

the graph (GRT) +11.41%

dot (POINT) +10.15%

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