In last week’s newsletter, we discussed how bitcoin’s volatility had become compressed on a weekly timescale, often a precursor to a significant price movement. This time, the expansion in volatility moved downward. Bitcoin began the week trading at $64,000 on Sunday evening, which marked the week’s high as prices experienced a sharp decline into Monday.

Throughout Monday, bitcoin broke through key support levels, eventually falling below the critical $60,000 psychological threshold. By noon, it reached a low of $58,320, flushing out long positions and marking nearly a 10% decrease from the week’s high.

A short-term recovery followed, with bitcoin climbing to $62,500 on Wednesday and sustaining above $62,000 on Thursday, buoyed by VanEck’s Solana spot ETF application to the SEC, which also rallied the altcoin market. However, Friday saw these gains wiped out, with bitcoin closing below the previous week’s lows at $60,325, representing a more than 6% weekly decline.

Long Liquidations Triggered

With Monday’s bearish move, over $305 million in long positions were liquidated across leveraged futures exchanges, marking the second-highest liquidation event since June 6th, when $360 million in long liquidations occurred after bitcoin failed to hold above the key $70,000 level.

Interestingly, there has been a notable lack of short liquidations in the past month. The most significant short liquidation event occurred on June 11th, totaling $87 million, more than three times less than the largest long liquidation day experienced the week prior.

Looking at the aggregate bitcoin exchange liquidation map, we can see a significant amount of short liquidity available despite the recent bearish price action.

Short-biased traders have more at stake, especially if the price surpasses the $63,500 level. For example, at $63,775, the leveraged futures markets face a cumulative short squeeze potential of $1.7 billion. In theory, this could propel bitcoin higher if buyers can push the price past these levels.

Fear & Greed Index

It is interesting to note that the Fear & Greed Index, a popular social sentiment indicator, recently dropped to a reading of 30 by the end of the week on Friday, indicating increased “fear” in the market. This matches the low reading of 30 seen back in mid-September 2023, when bitcoin was trading around $25,000.

Coincidentally, that marked the bottom of that market phase. It’s also noteworthy that sentiment remains so fearful despite the price holding above the $60,000 support level and being 140% higher than in September 2023.

Spot ETF Flows Update

There were four consecutive days of inflows this week from Tuesday to Friday; however, they were overshadowed by the large outflows seen on Monday. Over $174 million in ETF outflows occurred on Monday, with more than $90 million coming from Grayscale’s GBTC fund.

The rest of the week saw $137 million in inflows, with the majority coming from Fidelity’s FBTC fund, which received $48.8 million on Tuesday, and ARK Invest’s ARKB fund, which took in $42.8 million on Friday. By the end of the week, net ETF assets stood at $52.12 billion, a decrease of over 5 percent from the previous week’s total of $55.55 billion.

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