Has Bitcoin's Rebound Ended?…Downward Pressure from Short Squeeze Dissipation and ETF Fund Outflows

▲ Bitcoin (BTC) Exchange Traded Fund (ETF) ©CoinReaders

Bitcoin (BTC) failed to maintain its rebound last week and has turned bearish again. Analysts suggest that investor sentiment is shrinking again, as the short squeeze (buying pressure occurring to liquidate or cover short positions) has ended, weakening upward momentum, coupled with sluggish buying from U.S. institutional investors and global macroeconomic uncertainties.

According to CoinMarketCap, a cryptocurrency market data aggregator, as of July 7 (local time), Bitcoin traded at $63,403.01, down 1.43% over 24 hours. During the same period, the total cryptocurrency market capitalization also decreased by 1.45%, showing a similar trend to Bitcoin. The media cited the July rally, which was driven by a short squeeze, losing its momentum as the biggest reason for this decline.

Indeed, buying pressure is rapidly cooling in the derivatives market. After a rally that saw approximately an 8.4% increase with over $500 million in leveraged positions liquidated for six consecutive days recently, Bitcoin futures open interest decreased from 776,000 BTC on July 3 to 740,000 BTC. The media explained that the decrease in open interest indicates the unwinding of existing positions rather than the inflow of new leveraged buying. In other words, the recent rise was an temporary rally created by the liquidation of short positions rather than new capital inflow.

Slowing spot demand was also identified as a burden. The U.S. Coinbase premium recorded negative values for 50 consecutive days, and Bitcoin spot ETFs continued net outflows for 8 consecutive weeks, indicating that buying by U.S. institutional investors is struggling to recover. Simultaneously, as global government bond yields, including Japan's 30-year government bond yield hitting a high, rose, the investment appeal of non-interest-bearing Bitcoin was relatively weakened, the media analyzed.

Geopolitical tensions also added pressure to the market. International oil prices surged as the U.S. launched airstrikes against Iran in response to attacks on merchant vessels in the Strait of Hormuz and revoked exemptions for Iranian crude oil sanctions, strengthening risk-off sentiment. The media assessed that this correction was largely influenced by Middle Eastern geopolitical risks and global macroeconomic variables rather than negative factors specific to cryptocurrency itself.

The media presented $62,498 as a key short-term support level. This range is at the 50% Fibonacci retracement level, and if it successfully holds, a retest of the recent high of $64,500 is expected. Conversely, if it falls below $62,500, there is a possibility of further correction down to the next major support level of $61,377. Additionally, Bitcoin spot ETF fund flows this week and the minutes from the U.S. Federal Reserve's (Fed) June Federal Open Market Committee (FOMC) meeting were identified as key variables that will determine the future direction of the market.

*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.*