Bitcoin price falls below $20,000 as trader piles into BTC and ETH shorts
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(Kitco News) – The cryptocurrency market came under pressure along with global financial markets on Thursday as the US Dollar Index (DXY) rose to an intraday high of 109.995, its highest level since September 2002.
DXY 1 week chart. Source: TradingView
Few assets were spared as the dollar edged higher, with the S&P 500, DOW and NASDAQ all in the red at time of writing, down 1.03%, 0.45% and 1.81% respectively.
Data from TradingView shows that Bitcoin (BTC) came under pressure in early trading on Thursday, sending the top cryptocurrency down to a low of $19,582 near midday before being bid back to support at $19,800.
BTC/USD 4-hour chart. Source: TradingView
The jump in volatility was predicted by Senior Kitco market analyst Jim Wyckoff, who warned in his morning Bitcoin brief that “Quiet sideways trading continues, but probably not for long. History shows September can be a tough month for financial markets.”
As for when volatility will ease, Wyckoff suggested it could continue for some time as bullish traders continue to be overwhelmed by bears.
“Look for more volatility in the cryptos in the near term. Bitcoin bulls need to show more strength to break the bearish trend that is still in place on the daily chart, albeit just a bit,” Wyckoff said.
Further evidence that sentiment around Bitcoin remains negative was provided by crypto analysis firm Santiment, which posted the following chart showing the increase in BTC’s average funding rates.
Bitcoin average funding rate. Source: Sentiment
“Traders continue to short whenever prices see a significant price dump. According to BTC’s average funding rate across Binance, BitMEX, DYDX, and FTX, the reaction to Friday’s drop was the most aggressive traders went against the markets since May,” Santiment said in the tweet that accompanied the chart.
Ethereum shorts are piling up
One of the biggest stories in crypto at the moment is the upcoming Ethereum (ETH) Merge, which is predicted to take place on September 15th.
While many had expected a “buy the rumor, sell the news” type of event, it’s starting to look like the merger has already factored in, leading investors to position themselves ahead of a potential price drop.
Evidence of the bearish position ahead of the Ethereum merger is shown in the following chart from Santiment, which noted that “Ethereum disbelief is strong from traders during a particularly volatile week of trading. The public has shorted, across exchanges, by the largest ratio since June 2021.”
Ethereum’s average funding rates. Source: Sentiment
Santiment issued a warning to go along with the expected pullback in the Ether price, highlighting the fact that “Historically, price increases are more prevalent under these conditions.”
As it stands now, Ether is down 0.93% on the 24-hour chart and is trading at a price of $1,554.
A quiet day in the altcoin market
Overall, it was a negative day for the crypto market, with relatively few bright spots amid a sea of red.
Daily performance in the cryptocurrency market. Source: Coin360
Of the top 200 coins listed on CoinMarketCap, the best performer for the day is Decred (DCR), which posted a gain of $11.7, followed by an 11% increase for Balancer (BAL) and an increase of almost 7 % for beleaguered Celsius (CEL) token.
The total cryptocurrency market cap is now $967 billion, and Bitcoin’s dominance rate is 39%.
Disclaimer: The views expressed in this article are those of the author and may not reflect the views of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not an invitation to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept responsibility for any loss and/or damage arising from the use of this publication.
