Skies of blue
Rumour has it that if you stare long enough into the Bitcoin weekly chart, Louis Armstrong’s What a Wonderful World can be heard in the background. It’s been six long weeks since we last grazed the rarified heights of $40k, and this week’s resurgence brought with it a slew of bullish sentiment as BTC roared from a 29.5k low to the brink of $41k. With recent FUD firmly dispelled, crypto enthusiasts are once again setting their sights on a resumption of the past year’s bull run. As BTC rallies to close above $40k, the rampant optimism pervading the market may not be misplaced.
BTC’s remarkable climb toward the top of its current trading range was in part accelerated by cascading liquidations, with Bybit data indicating that on 25 July $1bn in short positions evaporated in the space of 24 hours, volumes not seen since 19 May — when $8bn in longs were liquidated as BTC fell 12.22% to $30k. The largest short liquidated was a whopping $29.3m position on Huobi, just one of many bears forced into a temporary hibernation by a market that refuses to relent.
Reigning in leverage
As crypto continues to mature, cementing its place in the mainstream, liquidations of this scale are likely to become less volatile. Just this week, FTX and Binance announced plans to limit futures to a maximum of 20x leverage. For context, traders on the platforms were up to now able to enter positions with upwards of 100x leverage, essentially meaning that a 1% move in price would result in either a 100% gain, or liquidation, for those with extremely high-risk appetites. While those passionate about sovereignty may view these limits as a form of censorship, they can form important consumer protection safeguards against high-risk offerings in an already volatile market.
The move comes in the face of increased regulatory scrutiny, as exchanges seek to integrate fully into the traditional global financial system. Binance’s CEO, Chanpeng “CZ” Zhao, went so far as to voice his willingness to step down as the exchange looks to become a fully regulated financial institution.
Elsewhere, XRP enjoyed a week of 16% gains as Ripple announced the launch of an XRP-to-fiat remittance corridor between Japan and the Philippines. This despite a surge in dominance for BTC that has presumably seen alt season put on hold for the foreseeable future.
Forward focus
It’s a been a long three ̶y̶e̶a̶r̶s̶ months since the giddy euphoria of the $60k stratosphere was replaced with fear, uncertainty, and doubt. As we balance on the knife’s edge of $40k, supported by positive sentiments across the sector, hodlers can once again dare to dream. Undoubtedly, a rejection here could return us to the mid-$30k region as BTC looks to solidify the supports it’s just claimed. From a macro perspective, however, gazing out across the budding candles and on-chain data, it’s hard not to see trees of green…