Despite Strategy's Bitcoin Sale, Rapid Recovery…Is the Bull Market Back?

▲ Strategy (MSTR), Bitcoin (BTC)/AI generated image ©

Bitcoin (BTC) dropped to $61,300 intraday on news of Strategy's Bitcoin sale but quickly rebounded, drawing market attention back to whether buying momentum will recover. However, while investor sentiment in the derivatives market showed signs of improvement, analysis suggests that a rally past $65,000 will be difficult if spot capital inflows do not continue.

According to crypto media outlet Cointelegraph on July 7 (local time), immediately after Strategy's announcement of its Bitcoin sale, the price dropped to $61,300 but later rebounded to $63,500. This was partly due to the company securing an additional $216 million in cash, which somewhat alleviated concerns about its ability to pay dividends and repay debt. The Bitcoin perpetual futures funding rate (annualized) rose to 9%, moving away from negative funding rates seen last weekend and indicating a balance between bullish and bearish leverage demand.

In contrast, a somewhat cautious atmosphere persisted in the options market. Put option premiums on the US crypto exchange Deribit recorded higher levels than call options, and the put-call ratio was tallied at 1.15. However, considering that this figure can surge to more than double during periods of extreme market instability, the current level is still considered within a neutral range.

The media also noted the net inflow of $223 million into US-listed Bitcoin spot ETFs last week. This marked the first net inflow after 10 consecutive trading days of net outflows. Earlier in June, a cumulative net outflow of $4.51 billion significantly dampened investor sentiment, but analysis suggests that if spot ETF fund flows reverse in the future, it could have a positive impact on the derivatives market as well.

The sharp drop in the price of Stretch (STRC), Strategy's perpetual preferred stock with a 12% annual yield, was also identified as a factor contributing to recent bearish sentiment. However, the media explained that it is uncertain whether additional Bitcoin sales are urgent, as Strategy holds enough cash to pay dividends for approximately 17 months. Nevertheless, it added that Strategy has recorded an estimated loss of about $8 billion on its Bitcoin investment, indicating that bears still hold the upper hand.

On-chain data showed that selling pressure from long-term holders is slowing down. The amount of long-term holders' inflows to exchanges decreased from an average of 8,040 BTC per day to 4,130 BTC, signaling strengthening support at $60,000. However, the media predicted that if significant net inflows into Bitcoin spot ETFs do not continue, a skeptical view in the derivatives market is likely to persist, and the possibility of a sustained rise above $65,000 could be limited.

*Disclaimer: This article is for investment reference only and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*