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▲ Kevin Warsh, Bitcoin/AI generated image ©
As Bitcoin (BTC), the leading cryptocurrency in the virtual asset market, repeatedly experienced short-term sharp fluctuations and once again broke the $64,000 mark, attention is focused on the background of the buying spree that instantly absorbed even the largest-ever sell-off from Strategy, a giant whale in the market. Experts analyzed that despite the apparent large-scale selling pressure, the enthusiasm in the derivatives market, along with the real cash buying that finally began to flow in, drove this rebound.
According to investment media FXStreet on July 7 (local time), Bitcoin's volatility expanded, surging to just under $64,000 last Sunday before sliding to around $62,000 on Monday. The direct trigger for this decline was Strategy's large-scale equity sale, revealed through a U.S. Securities and Exchange Commission (SEC) filing. Strategy, which holds the largest Bitcoin treasury assets among corporations, announced that it sold a record 3,588 BTC for $216 million to fund dividend payments, and still retains the authority to sell an additional $1.25 billion worth.
The media diagnosed that the temporary rise over the weekend was a somewhat unstable rally driven by the futures market without spot buying. On Sunday, net futures buying amounted to approximately $415 million, with $687 million in buying exploding within four hours, forcibly liquidating about $33 million in short positions that had bet on Bitcoin's decline. In contrast, spot fund flows recorded a slight negative during the same period. Such a futures-driven rise without spot backing carried the vulnerability of potentially leading to position liquidations at any time.
Indeed, as soon as Strategy's sale announcement hit the market on Monday morning, a massive unwinding of selling positions swept through. Within just four hours, approximately $456 million in net selling flooded the futures market, leading to an extreme seesaw market where about $42 million in long positions and $49 million in short positions were simultaneously liquidated. However, the full-fledged recovery that began on Monday afternoon showed a distinctly different pattern from Sunday's unstable rise. Alongside approximately $568 million in futures buying, a significant $143 million in spot buying, which had been quiet until then, flowed into the spot market for the first time in days, solidly supporting the price.
Amidst this price turmoil, Bitcoin's futures funding rate firmly remained in positive territory for over a week, representing the market's robust upward expectations. The current open interest in the futures market stands at a staggering $20.6 billion, indicating that optimism among leveraged investors is still alive. However, it is also pointed out that the current structure, with persistent funding rate burdens and a large number of long position investors excessively concentrated in leverage, is a fragile equilibrium highly vulnerable to market shocks.
Going forward, key variables investors should watch are whether Strategy's current sale marks the beginning of a long-term liquidation rally and if the unused $1.25 billion in approved sale proceeds will act as a potential negative factor suppressing upward resistance. In addition, ahead of the release of the U.S. Federal Reserve (Fed)'s June Federal Open Market Committee (FOMC) meeting minutes this Wednesday, the market is pricing in a 75.6% probability that the July benchmark interest rate will be frozen at 3.50%-3.75%. If the minutes show a hawkish stance, a large number of leveraged long positions could be put to the test, in which case the upward resistance would be at the $62,300 to $62,800 range, and the downward support at $61,000 and $59,500.
*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.*
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