Bitcoin slid Monday to its lowest point in the past seven days, with traders saying bearish signals are appearing after the cryptocurrency’s 30 percent rebound from a market bottom in mid-March.
After recovering from the depths of the coronavirus-induced sell-off, bitcoin repeatedly failed to break above a price of $7,400.
Bitcoin futures contracts for June on exchanges such as Kraken are trading around $6,750, which suggests traders are pricing in further downside. Such “backwardation” — where futures trade at a discount to the spot price — represents a shift from last week, when futures were trading at a premium.
“Futures and our own activity indicate that speculators expect to see lower prices in the short term,” said Maxine Boonen, CEO of over-the-counter (OTC) bitcoin liquidity provider B2C2. “One particular hedge fund sold us $20 million of bitcoin today and they have usually been right.”
Early losses on Monday triggered $29 million in position liquidations for futures traders on the BitMEX exchange, exacerbating the sell-off. Hourly liquidations on BitMEX had averaged just $200,000 over the past few days.
In traditional markets, the S&P 500 of large U.S. stocks fell 1 percent as the death toll from the coronavirus continued to cast a pall. New York state, now the epicenter of the pandemic, surpassed 10,000 deaths, Gov. Andrew Cuomo said Monday.
Constantine Kogan, a partner at crypto fund BitBull Capital, said the “macroeconomic trend isn’t positive so it will continue to put pressure on crypto,” Kogan said.
Elsewhere, gold, a classic haven asset and hedge against inflation, is currently trading up at 1.2 percent.
Although some cryptocurrency analysts and investors think bitcoin could prove to be a hedge against inflation, the yellow metal is outperforming it.
“A break below $6,500 will likely lead to another round of liquidations and send the price towards the $6,100 to $6,200 area,” said Denis Vinokourov, head of research at crypto investment brokerage Bequant, said of bitcoin.
“For the bulls, a break below will be particularly painful,” he said. “There really isn’t much support until the $5,000 zone. This cautious tone is supported by a shift in the futures curve.”