Market Wrap: Bitcoin Analysts Expect a Short Squeeze

Bitcoin pulled back on Friday after gaining nearly 10% earlier this week. The cryptocurrency was trading at around $32,000 at the time of writing and is up about 2% in the past seven days. Ether, the world’s second largest cryptocurrency, holds more than $2,000 and is up about 6% in the past week.

upside down momentum improving, which could keep crypto buyers active into the weekend. Some analysts expect a short squeeze to push bitcoin above the 50-day moving average around $34,000, given the oversold conditions in the charts.

“For the first time in many weeks, we are seeing bullish signals here and expect Bitcoin to move towards the top of the $30,000-$40,000 range,” wrote Pankaj Balani, CEO of Delta exchange, in an email to CoinDesk.

Latest prices

Related: Bitcoin’s Big Institutional Week: JPMorgan Brings Crypto To All Wealth Management Clients & More

cryptocurrency:

Bitcoin (BTC) $32324.8, -0.05%
Ether (ETH) $2026.5, -0.13%

Traditional markets:

S&P 500: 4411.8, +1.01%
Gold: $1801, -0.32%
10-year Treasury yields closed at 1.281%, compared to 1.263% on Thursday

“In terms of options, we’ve seen good coverage between $35,000-$40,000 strikes for the weekly maturity,” Balani wrote. “For the July expiration date, there is still quite a bit of open interest in the $35,000 strike, which should act as a ceiling for BTC for this month.”

Overall, risk sentiment in traditional and crypto markets is improving as concerns about tighter monetary stimulus wane. On Thursday, the European Central Bank (ECB) committed to keep interest rates low for longer and adjust its policy stance to allow for a slight overshoot of the 2% inflation target.

Related: Money Reinvented: Regulate Stablecoins, Don’t Suffocate Them

The ECB’s announcement, along with a broad decline in global government bond yields, contributed to higher stock prices last week. Apart from the return range, improving sentiment and positive comments Tesla CEO Elon Musk on Wednesday kept crypto bulls active.

Probability of Bitcoin Options

Bitcoin options traders estimate an 8% chance that the cryptocurrency will reach a new peak above $64,800 by December 31, according to data source Skew.

In addition, six-month implied volatility, or investors’ expectations for price turbulence, has fallen to a two-month low of 80% at the time of writing, peaking at 122% on May 17.

That means investors expect price consolidation to continue for a while, CoinDesk’s wrote Omkar Godbole.

Short squeeze expected

“If BTC maintains the lower range of 30K, shorts will begin to squeeze as BTC moves toward the mid-range, likely accelerating in the coming days/weeks,” wrote Sashimi Nakamoto on CryptoQuant.

The chart below shows the bitcoin leverage ratio, which is open interest divided by foreign exchange reserves, reaching its highest level since April. Bitcoin’s funding rate is slightly negative, indicating higher short-term interest than long-term interest, according to Nakamoto.

Funding rate measures the cost of funding long positions in the bitcoin perpetual swaps market, a type of derivative in the cryptocurrency markets similar to futures contracts in traditional markets.

Crypto Fund Flows Weaken

Since June, total assets under management of exchange-traded and over-the-counter-traded digital asset investment products have fallen 14% to $34.8 billion.

Compared to traditional asset classes, digital asset markets still have a “long way to go before more risk-averse investors are fully comfortable,” according to a report. report by CryptoCompare.

NFT impact on ether price

As NFTs gain popularity despite a general bearish sentiment in the crypto market, some NFT critics within the market have taken on Twitter to blame the non-crypto natives cashing out their ether immediately after NFT sales for the lackluster price movement of the second-largest cryptocurrency by market cap.

But according to multiple analysts and market participants, the impact of NFT sales, if any, remains a non-factor on ether prices. Instead, the complaint shows the frustrations of many traders and investors in a dull market.

The speculation “is more a reflection of current market sentiment,” Daniel Lv, co-founder of the China-based blockchain Nervos Network, told CoinDesk’s Muyao Shen through a representative.

The blame isn’t entirely irrational, though, as growth in the NFT market hasn’t completely slowed down, in part due to the sheer number of approvals it’s received from non-crypto celebrities.

Altcoin Collection

AXS price doubles in two days: The governance token of the Axie Infinity platform, AXS, has doubled in price since Wednesday. As of Friday, the AXS token was trading at a new all-time high of $30, implying a year-to-date gain of over 5,700%. Axie Infinity is a blockchain-based trading and fighting game that allows players to collect, breed, raise, combat and trade token-based creatures known as ‘axies’, which are digitized as their own NFTs.
RUNE Tumbles: Thorchain’s token, RUNE, tumbled in digital asset markets after the blockchain suffered an exploit for the second time in two weeks, it cost about $8 million. The RUNE price was $3.65 as of writing, down 22% in the last 24 hours, in the worst performance among digital assets tracked by Messari with a market cap of at least $500 million. The token has lost about 80% since it hit an all-time high in May. Thorchain said late Thursday that it was hit by an exploit, which has reportedly cost about $8 million. Last week, in another incident, about 4,000 ether (ETH, -0.11%) ($8.2 million) was taken out of protocol.
Karura Swap opens for trading: The first decentralized exchange on the Polkadot and Kusama ecosystem has been launched by Karura, the Acala Foundation’s DeFi network.
Tron blockchain: Justin Sun, founder of the Tron blockchain network, said that the recent explosive growth on Tron has been overshadowed by its more famous rival Polygon. While the total value in Polygon surpasses that in Tron, Tron is growing faster in other areas and gaining momentum recently with impressive growth in stablecoin.

Relevant news

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What will happen to Bitcoin SV?

Other markets

Most digital assets on CoinDesk 20 ended lower on Friday.

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

tezos (XTZ) +3.24%

Notable losers:

the graph (GRT) -4.82%

dot (POINT) -4.1%

nucypher (NOT) -3.76%

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