In recent days, the price of Bitcoin has recorded a small but significant rebound.
Today, however, it seems to have stopped.
At the root of this temporary halt there are in particular two different factors, each of which in its own way is playing an important role in the short term.
Summary
The first factor: short squeezes
Starting from last Thursday there have been as many as four different short squeezes on the Bitcoin futures market.
This is a market dominated by short-term traders, but with an important distinction: on one side there are retail speculators, and on the other institutional whales.
Retail traders not only have less capital, but they also have far fewer skills and far less information. Moreover, they generally have slightly longer time horizons, and are easily manipulated.
On the other side there are institutional whales, who have much more capital and, in moments like these, effectively have the strength to manipulate the price of Bitcoin.
Furthermore, institutional whales also have far more skills and, above all, far more information, some of which is completely out of reach for retail traders.
In fact, whales are not really manipulable (on the contrary, they are manipulators), and they often have short, or even very short, time horizons, also because they often use algorithms, and not people, both for analysis and for trading operations.
The collapse of the price of Bitcoin at the end of May/beginning of June was caused primarily by retail traders selling BTC. The whales managed to convince them to sell, and above all to remain short even after the small rebound from the low ($59,000) that occurred on June 7.
Due to the bearish sentiment, retail traders continued to short Bitcoin, and the whales managed to push the price up, obviously after having opened long positions, so that the retail traders’ short positions would be liquidated.
This dynamic produced three mini-short squeezes (that is, violent liquidations of bearish short positions), one last Thursday, one on Sunday evening and one yesterday.
The result was a rise in the price of Bitcoin to above $67,000.
Today this phase characterized by retail traders being short and whales being long has ended, because the whales no longer seem to be long in the short term, at least for now.
The second factor: SpaceX
On Friday, trading of SpaceX shares on the stock market was launched.
In the first two hours, trading volumes were extremely high, then gradually they decreased.
As for the price, although the initial pre-launch placement had been done at $135, the opening price at which the first trade on the stock exchange took place was $150, and already on Friday a peak of $177 was reached, then the day closed at $161.
Yesterday, however, a mini-bubble seems to have started to inflate, given that today in pre-market the price has already exceeded $200 with as many as 13 consecutive hourly candles, almost all positive.
Although it is impossible to say when – and especially at what price – this mini-bubble will burst, it is certainly draining liquidity from other markets, and in particular from Bitcoin.
In fact, it is very likely that, as usual, this mini-bubble is being fueled more by retail traders than by whales, so much so that at a certain point the whales might instead start selling SpaceX shares to cash in their profits.
However, as long as this mini-bubble continues to inflate, the US stock market will continue to drain some liquidity from the crypto market, in particular retail liquidity.
The consequences for the price of Bitcoin
Therefore, the growth phase of recent days, driven by short squeezes, has ended, and today the US stock market is draining retail liquidity from the crypto market.
Moreover, the rebound of recent days was not fueled by the opening of new long positions, but primarily by the closing of short positions, which means it was not supported by the entry of new liquidity.
In other words, on Saturday, June 6, the collapse phase ended, and on Sunday, June 7, a new small growth phase began, fueled not by the inflow of new liquidity but by the closing of short positions.
This latter phase ended yesterday with the last of the three short squeezes, while another one is starting today.
At this moment, however, it is still impossible to determine precisely what kind of phase this is, and especially whether it will be characterized by a further rise, a decline, or a sideways movement.
In fact, today the whales seem to be waiting when it comes to Bitcoin, precisely because it is not yet clear what kind of new phase has begun today. It is, however, possible that by the end of the day the whales will make a decision and go long or short again, particularly if the mini-bubble on SpaceX were to burst already.
