Risk Aversion Intensifies, Bitcoin Stages a Rollercoaster Ride: Dips Below $63,000 Before Rebound, Over 100,000 Liquidations

Risk Aversion Intensifies, Bitcoin Stages a Rollercoaster Ride: Dips Below $63,000 Before Rebound, Over 100,000 LiquidationsAmidst heightened global tensions, risk assets have faced a sell-off, and Bitcoin has not been spared. In the past 24 hours, Bitcoin's price plummeted from $66,700 to below $63,000, representing a decline of nearly 3%

Risk Aversion Intensifies, Bitcoin Stages a Rollercoaster Ride: Dips Below $63,000 Before Rebound, Over 100,000 Liquidations

Amidst heightened global tensions, risk assets have faced a sell-off, and Bitcoin has not been spared. In the past 24 hours, Bitcoin's price plummeted from $66,700 to below $63,000, representing a decline of nearly 3%. Other cryptocurrencies also experienced a slump, with Solana dropping over 8%, Dogecoin falling nearly 5%, Ethereum and Cardano dipping over 4%, and BNB dropping almost 3%.

It's noteworthy that Bitcoin bounced back after dipping below $63,000. As of this writing, it's trading at $65,000, up 1.15%. This rollercoaster ride of dipping and rebounding has taken investors by surprise. According to coinglass data, over the past 24 hours, the total number of liquidations across the entire crypto market surpassed 100,000, with a total liquidation amount of $292 million (approximately 2.1 billion yuan).

Recently, cryptocurrency prices have experienced intense volatility. On the evening of July 29th, Bitcoin surged to $71,000, surpassing the $70,000 mark for the first time in two months. The primary driver behind Bitcoin's ascent then was US Presidential candidate Donald Trump publicly expressing his support for cryptocurrencies. Trump stated that if he were to return to the White House, he would ensure the government maintains its existing Bitcoin holdings at 100% and would include Bitcoin as part of the US strategic reserves.

Trump's positive stance towards cryptocurrencies initially sparked a market frenzy, but Bitcoin has since retreated from its peak. The main reasons behind this decline include:

1. Tensions in the Middle East escalate, fueling risk aversion among investors: On July 31st, Hamas leader Ismail Haniyeh was assassinated in Tehran, Iran. Iran condemned Israel's assassination attempt. The New York Times reported that Iranian Supreme Leader Ayatollah Khamenei has ordered a direct strike on Israel in retaliation for the attack on the Hamas leader. This incident has heightened tensions in the region, leading investors to adopt a risk-averse approach, pushing up gold and oil prices while causing risk assets like Bitcoin to significantly decline.

2. Potential US government sale of seized crypto tokens: Recent reports suggest that the US government may be planning to sell a batch of seized crypto tokens. This news has further fueled market anxieties surrounding cryptocurrencies.

3. Bitcoin's price is perceived as excessive, increasing the risk of a bubble: Morgan Stanley analysts warn that any recovery in the cryptocurrency market might be tactical rather than the beginning of a sustained bull market. They point out that Bitcoin's current price is excessively high, not only in relation to its production cost (currently around $43,000) but also in comparison to gold, adjusted for volatility, where the value currently sits at $53,000. Morgan Stanley's analysis highlights a key indicator that tracks the difference between Bitcoin's price and its implied price, which aligns with the market value of total gold held by the private sector (adjusted for volatility). This indicator currently points towards a mean reversion near zero, which ultimately restricts the potential for Bitcoin's price to rise in the long term.

4. Technical analysis of Bitcoin reveals potential downside risks: Peter Brandt, a seasoned trader and chart analyst, tweeted on July 17th, "Despite Bitcoin's recent bounce, we must be wary of the potential downside risk indicated by the charts."

Going forward, Bitcoin's price trajectory will continue to be influenced by numerous factors, including the macroeconomic environment, regulatory policies, and market sentiment. Investors should remain vigilant, invest cautiously, and refrain from chasing gains or selling in panic.

Summary:

Amidst heightened global tensions and the potential US government sale of seized crypto tokens, Bitcoin has recently faced a sell-off, dipping below the $63,000 mark. However, Bitcoin subsequently rebounded, trading at $65,000 as of this writing. Morgan Stanley analysts warn that Bitcoin's price has become excessive, increasing the risk of a bubble. Investors need to remain cautious and invest prudently.