Market Wrap: Bitcoin Under Pressure Despite Improving Sentiment

1 July 2021

Bitcoin dipped below $34,000 on Thursday as selling pressure increased into July. However, traders expect buyers to remain active above $30,000 support as sentiment improves. 

Positive news could limit downside moves after a volatile first half of the year. Concerns about regulatory crackdowns appear to have eased, especially as the bitcoin hashrate stabilized after falling for 10 straight days. The hashrate decline was mostly due to China’s shutdown of several cryptocurrency mining operations in the country.

“As miners spread to other locations, they will likely choose places with secure access to cheap energy sources,” wrote Ulrik Lykke, executive director at digital asset fund ARK36, in an email to CoinDesk. “As a result, hashrate will start recovering, and the network will become even more stable.” 

Bitcoin is up about 13% year to date compared to a roughly 16% gain in the S&P 500.

Latest prices


Traditional markets:

  • S&P 500: 4317, +0.5%
  • Gold: $1,775.9, +0.31%
  • 10-year Treasury yield closed at 1.461%, compared with 1.466% on Wednesday

Bearish sentiment wanes

Bitcoin’s put-call open interest ratio has slipped to a six-month low, indicating an ebbing of bearish sentiment.

According to data tracked by options analytics platform Skew, the ratio measuring the number of open positions, or open interest in put options relative to open interest in call options, fell to 0.60 on Wednesday, a level last seen in early January.

Chart shows bitcoin put/call ratio.
Source: Skew

The recent decline in the put-call open interest ratio may have been fueled at least partly by a pickup in demand for calls or unwinding of long put positions, meaning an unwinding of bearish bets.

Another sign of improving sentiment is the recent positive uptick in bitcoin’s funding rate, which is the cost to fund long positions in the market for bitcoin perpetual swaps, a type of derivative in the cryptocurrency markets similar to futures contracts in traditional markets. 

“Funding rates represent traders’ sentiments of which position they bet on in the perpetual swaps market,” tweeted CryptoQuant on June 29. “Positive funding rates imply that many traders are bullish and long traders pay funding to short traders.”

Chart shows bitcoin funding rate with price.
Source: CryptoQuant

Ether bounces back relative to bitcoin

Ether has outperformed bitcoin over the past few days and technical charts suggest further upside is ahead. The ETH/BTC ratio held support at the 100-day moving average as charts signaled oversold conditions and improving momentum. The ratio declined from resistance in May, which preceded the broader crypto sell-off. 

Daily chart shows ETH/BTC with RSI.
Source: TradingView

The chart below shows the 90-day correlation between bitcoin and ether. The two cryptocurrencies are less correlated than a year ago despite a slight advance in co-movement over the past quarter.

Chart shows 90-day correlation between BTC and ETH.
Source: CoinDesk digital asset price indexes

Stablecoin risks

Analysts are looking into the rapid growth of stablecoins from a credit perspective.  

Tether, the largest stablecoin issuer, which increased total assets of the dollar-linked stablecoin USDT to $62.8 billion on June 28, said it only holds 26.2% of its reserves in cash, fiduciary deposits, reverse repo notes and government securities, with 49.6% in commercial paper (CP), a type of short-term corporate debt. 

“A sudden mass redemption of USDT could affect the stability of short-term credit markets if it occurred during a period of wider selling pressure in the CP market,” credit rating agency Fitch Ratings said in a report. “These figures suggest its CP holdings may be larger than those of most prime money market funds in the U.S.,” as well as in Europe, Middle East and Africa.

David Grider, lead digital asset strategist at the independent research firm Fundstrat, wrote in a separate report Thursday that pegged stablecoins “look a lot more like digital debt than digital dollars.”

“Tether is essentially a big credit fund with a pool of debt assets of their own that they say cover the value,” Grider wrote. “They say most of their assets are in money market commercial paper, which if true would be relatively low-risk assets.”

Tether Reserves Breakdown
Source: Fitch Ratings

Altcoin roundup

  • DOGE drives Robinhood’s gain: Robinhood, the popular trading app for stock, options, gold and cryptocurrencies, filed for a public offering that could be worth up to $100 million. A big chunk of that growth – 34% of the firm’s crypto transaction revenue in the first quarter – was from DOGE (-1.26%), the memecoin that has surged in popularity this year.
  • Dogecoin’s fee change: A new fee structure for Dogecoin has been designed to reduce overall transaction fees as well as incentivize node operators to relay low-fee transactions to miners. The proposal, spearheaded by Dogecoin core developer Patrick Lodder and his team, would be implemented gradually over multiple software releases. Upon completion, the minimal relay fees from 1 DOGE would be changed to .001 DOGE. 
  • USDC expands to Tron: Circle said Thursday the USDC stablecoin has been added to Justin Sun’s Tron network, which will expand the stablecoin’s availability to millions of users across Asia. The update comes after CoinDesk reported Tuesday that USDC’s CENTRE consortium was considering up to 10 more blockchains. The stablecoin is currently native to four blockchains – Ethereum, Algorand, Stellar and Solana.

Relevant news

Other markets

Most digital assets on the CoinDesk 20 ended up lower on Thursday.

Notable winners as of 21:00 UTC (4:00 p.m. ET): 

USD coin (USDC) +0.04%

Notable losers: 

the graph (GRT) -7.65%

chainlink (LINK) -6.93%

algorand (ALGO) -6.25% 

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