Bitcoin Price Holds Above $20,000 After Week of Forced Crypto Selling

Cryptocurrencies showed tentative signs of recovering from last week’s rout as Bitcoin price held above $20,000. Bitcoin rose as much as 1.6% on Tuesday in Asia and was trading at $20,665 as of 8:42 a.m. in Tokyo. The MVIS Cryptocompare Digital Assets 100 index climbed 1.5%. So-called altcoins like Solana and Polkadot were among gainers. 

After a turbulent week that saw Bitcoin plunge below the $20,000 level for the first time since 2020, some market watchers are pointing to possible signs that prices have bottomed -- at least for now. Realized losses on Bitcoin holdings reached a record $7.3 billion last week, Glassnode said in a report Monday.

“With forced sellers appearing to drive much of the recent sell-side, the market might begin to eye whether signals of seller exhaustion are emerging over the coming weeks and months,” the report said. 

Marcus Sotiriou, an analyst at GlobalBlock, pointed to the Glassnode data to say that “a macro bottom, or temporary bottom, could be close,” according to a note on Monday. Altcoins haven’t suffered the same “cascade in liquidations” as Bitcoin and Ether, which are the tokens primarily used as collateral for leveraged positions, he said. 

Any market recovery could prove fleeting, with central banks around the world bent on draining liquidity to combat runaway inflation. 

The T3 Bitcoin Volatility Index, a measure of the token’s expected 30-day volatility, has jumped back toward the highs of mid-May, when the collapse of the TerraUSD stablecoin rocked markets.

“A toxic mix of bad news cycles and higher interest rates has hurt the crypto market and we can anticipate more volatility in the upcoming weeks,” said Feroze Medora, director of APAC trading at Cameron and Tyler Winklevoss’s Gemini crypto platform, in a note on Monday.

‘Chasing Liquidations’

Bitcoin has now seen two “distinct capitulation phases” since it peaked at close to $69,000 in November, Glassnode said. The first was triggered by the collapse of the TerraUSD stablecoin in early May, and the past week’s one was driven by “a massive industry-wide deleveraging, both on and off-chain.” 

Current trading patterns in Bitcoin and Ether indicate some large crypto holders are “chasing liquidations to profit from forcing other players out,” said Chiente Hsu, chief executive officer of decentralized finance platform ALEX.

Adding to the uncertainty is the intense pressure on DeFi applications. Their popularity as a source of high yields soared when pandemic-era stimulus drove a record-breaking crypto boom.

Now they are being forced to take unprecedented measures to protect themselves against a chain reaction of liquidations. Embattled crypto lending platform Celsius Network Ltd. said Monday it needs more time to stabilize its liquidity and operations after freezing deposits earlier in June.