Behind Bitcoin's $60,000 mark: Why do bullish investors keep liquidating their positions?

"No one knows where the apex of Bitcoin's rally is now." A Wall Street hedge fund manager told reporters with emotion.

As of 18:00 on April 2, the price of Bitcoin was hovering around $59,527 per coin, breaking through the $60,000 round mark at one point during the session, hitting a record high of $60,190 per coin.

According to Alex Kruger, a virtual encrypted digital global market analyst, behind this is Bitcoin ushering in new benefits. One is that the Chicago Mercantile Exchange Group (CME Group) plans to launch a mini-Bitcoin futures contract on May 3, which will help reduce the risk of small and medium-sized investors holding positions and attract them to enter the market, driving up Bitcoin investment demand; The encrypted asset exchange Coinbase will land on Nasdaq on April 14, indicating that the capital market's pursuit of encrypted digital asset transactions has further increased.

"These positives have made Wall Street investment institutions feel that the supervision of encrypted digital assets by the US regulators seems to be loosening, which gives them more confidence to push the price of Bitcoin to new highs." He said bluntly.

House Bill Aims to Protect Bitcoin Retirement Accounts from Federal Ban: Last week’s cryptocurrency crash has caught the attention of regulators and administration officials as Congressional Republicans introduce a bill that would “protect” investors The ability to add Bitcoin to a 401(k) retirement plan. The bill, a companion bill to the House Financial Freedom Act of 2022, was introduced by Rep. Byron Donald (R-FL) and supported by fellow Rep. Warren Davidson (R-OH), Kim Wing (R- CA), David Schweickert (R-AZ), and Tom Emmer (R-MN). If passed, the U.S. Labor Department would not be able to limit the types of investments 401(k) account holders can choose from, including bitcoin — which Fidelity funds plan to offer later this year.

According to a press release, the bill was drafted in response to regulatory guidance issued by the U.S. Employee Benefits Security Administration on May 10, which suggested that investors should be prevented from adding cryptocurrencies to 401(k )plan.

As previously reported, Fidelity became the first brokerage to announce plans to begin offering bitcoin as an investment option in 401(k) accounts. (decrypt) [2022/5/21 3:32:48]

Du Jun, the co-founder of Huobi, said that Bitcoin’s ability to reach the 60,000-dollar mark this time is also closely related to the increasing acceptance of encrypted digital assets by mainstream financial institutions. For example, JPMorgan recently released a new report stating that the increasing abundance of bitcoin futures derivatives has reduced its price volatility, which will promote more and more investment institutions to include bitcoin in their investment portfolios. Once the private sector invests in bitcoin on a scale comparable to gold , the long-term value of the former will reach 13 trillion U.S. dollars, which will attract more investment institutions to chase up Bitcoin. In addition, Visa announced that it allows the use of cryptocurrency USDT to settle transactions on its payment network, and PayPal announced that it allows American consumers to use their cryptocurrency holdings to pay at its millions of online merchants around the world. The demand is further expanded.

MicroStrategy CEO: Bitcoin has outperformed gold over the past year: MicroStrategy CEO Michael Saylor tweeted that over the past year, Bitcoin (+264%) and the S&P 500 Index (+38%) All commodities below have outperformed gold. The most obvious explanation is that gold is losing its utility as a market store of value. [2021/6/24 0:04:25]

"The U.S. government's US$2.2 trillion fiscal stimulus plan this week has raised expectations for the U.S. quantitative easing policy, which is also the core basis for Bitcoin's rise to new highs." Du Jun pointed out.

It is worth noting that Bitcoin's new highs did not cheer all investors.

According to the latest data from Bitcoin Home, over 100,000 investors have liquidated their positions in the past 24 hours since the price of Bitcoin reached USD 60,000 on the evening of April 1. The pen liquidation list is close to 52 million yuan.

Max Keizer: Warren Buffett may have lost his reputation for being so harsh on Bitcoin: On May 4th, the famous American broadcaster and Bitcoin bull Max Keizer said that Warren Buffett is the most successful investment ever One of those who may have lost his reputation for being so harsh on Bitcoin. (Cointelegraph)[2020/5/5]

"Actually, most liquidation investors are bullish on Bitcoin, but because they use 50-100 times capital leverage to invest, as long as Bitcoin has a 1%-2% correction in the process of rising, they are unable to pay the margin. Compulsory liquidation." A person from an encrypted digital asset exchange revealed to reporters.

Du Jun said frankly that every time Bitcoin breaks through to a record high, there will be corrections of varying degrees to "digest" the previous gains, so investors need to control their positions and leverage risks in a timely manner, and pay close attention to the impact of corrections on their own investment security.

A Wall Street hedge fund manager involved in Bitcoin investment said that this time Bitcoin successfully reached a new high of 60,000 US dollars, and CME's launch of the mini Bitcoin futures contract is undoubtedly "indispensible".

VOICE | Dallas Mavericks Owner: Bitcoin Can't Be a Reliable Currency: NBA Dallas Mavericks owner and billionaire Mark Cuban says bitcoin has "no chance" of becoming a reliable currency in the future. The main problem with this is that Bitcoin is too difficult to use, not a technical problem. Cuban also said that if Bitcoin is to prove that it is a reliable currency that can be used in travel, or that one can move money across borders at scale, it will have to face several challenges. While there are large numbers of individuals using Bitcoin, the market is still small and has a lot of room to expand. Explaining to people why Bitcoin is better than other cryptocurrencies is a lot of work considering there are thousands of digital assets in the market. Many of these cryptocurrencies claim to be competitors and alternatives to Bitcoin, but so far it is unlikely that other cryptocurrencies will surpass Bitcoin's market capitalization. (Bitcoin Exchange Guide)[2019/12/11]

It is reported that the Chicago Mercantile Exchange (CME) plans to launch a futures product called "Mini Bitcoin" (Micro Bitcoin) on May 3, which is currently awaiting regulatory approval. The value of each "mini bitcoin" futures contract will be only 0.1 bitcoin, which is significantly lower than CME's standard bitcoin futures with a size of 5 bitcoins, and the mini bitcoin futures will be based on CME's bitcoin reference rate (BRR) for cash settlement.

Bitcoin futures closed up and ended the multi-day losing streak: The CME Bitcoin futures BTC March contract closed up $290, or 3.99%, ending the three-day losing streak at $7,550. The CBOE Bitcoin futures XBT March contract closed up $525, or 7.44%, at $7,580 after ending a five-day losing streak. [2018/2/7]

"The biggest advantage of this new Bitcoin derivative is to help small and medium investors avoid the risk of holding positions and the risk of sharp fluctuations in Bitcoin prices, and help attract more small and medium investors to enter the market." He confessed to reporters. This drives many Wall Street hedge funds to push up the price of Bitcoin in advance to "arbitrage" before small and medium investors enter the market.

It is worth noting that these Wall Street hedge funds are boldly pushing up the price of Bitcoin, while actively locking in the risk of price fluctuations through the existing Bitcoin futures products.

Data show that since the beginning of this year, the average daily trading volume of CME’s Bitcoin futures contracts has reached 13,800, which is equivalent to about 69,000 Bitcoins traded in the daily futures market.

Behind this, many Wall Street hedge funds are using Bitcoin futures and options derivatives to cash in and lock in gains.

The reporter has learned from many sources that since this week, many hedge funds have been aggressively buying options products that are bullish on Bitcoin, and some hedge funds are even betting that the price of Bitcoin will reach $83,000 by the end of April.

In the view of this Wall Street hedge fund manager involved in Bitcoin investment, this is more like a crazy gambling behavior-the data aggregation website Skew makes statistical estimates based on the execution price data of Bitcoin futures options contracts due on April 30 It was found that most institutional investors involved in bitcoin futures and options trading believe that the probability of bitcoin price breaking through $80,000 at the end of April is only about 6.2%.

"However, these institutions that dare to bet on Bitcoin hitting $83,000 at the end of April also have their own confidence." Alex Kruger analyzed. One is that the current Bitcoin balance on encrypted digital asset exchanges is decreasing, indicating that more and more investment institutions and investors are increasing their positions in Bitcoin. If large institutions enter the market, Bitcoin will experience a round of rise.

According to the data obtained by the reporter, there are currently more than 800,000 bitcoins held by global investment institutions, accounting for about 4.3% of the total supply of bitcoins. And many hedge funds believe that these two figures will double in half a year.

"Bitcoin is now entering a stage of a game of buying up and making profits. As long as there are new positives, the market will expect a large number of new investment institutions and investors to enter the market, and each new investor will be associated with Investment institutions believe that they will not be the last buyer.” The above-mentioned Wall Street hedge fund manager involved in Bitcoin investment pointed out.

When Bitcoin reached the round mark of 60,000 US dollars, more than 100,000 investors could only accept the bitter fruit of paying out.

"Obviously, this is all caused by high-leverage investment." The above-mentioned encrypted digital asset exchange said bluntly. In order to maximize the profit of buying up Bitcoin, many aggressive investors use 50-100 times capital leverage and chase up the whole position. Once Bitcoin suddenly pulls back 1%-2% in the process of rising, they are extremely vulnerable to liquidation. .

He admitted that he was a little helpless about the whole transaction. They have warned investors many times before that they need to pay attention to the risk of a sharp correction in the process of bitcoin rising to new highs, not to use excessive capital leverage and control the risk of positions, but in the face of bitcoin's new highs, many investors still choose the most radical Even individual investors went around looking for friends to borrow money, and continued to use 100 times leverage to chase Bitcoin up.

The reporter learned from many sources that several encrypted digital asset exchanges are planning to recommend highly leveraged investors to use mini bitcoin futures derivatives to hedge against sharp fluctuations in bitcoin prices and position risks. But this move has little effect. First, some investors believe that this will weaken the benefits of buying up Bitcoin. Second, they have concerns about futures derivatives, thinking that it has a higher risk of liquidation.

"Therefore, investor risk education still has a long way to go." The aforementioned encrypted digital asset exchange person pointed out. Since the beginning of this week, as the U.S. government launched a new round of infrastructure investment plans, the market’s expectations for inflation and the Fed’s continuation of the loose monetary policy have once again heated up, and many investors have taken full positions with 100 times leverage to chase Bitcoin up. In this regard, they are reminding these investors not only to see the benefits brought by the new fiscal stimulus plan, but also to pay attention to the fact that it may lead to higher U.S. bond yields again, causing a sharp correction in the price of Bitcoin during the rise.

"The recent negative correlation between Bitcoin and U.S. bond yields is on the rise." He emphasized. When the 10-year U.S. bond yield exceeded 1.7% on March 31, the price of Bitcoin fell from $59,500 to about $57,000, causing more than 150,000 investors to liquidate their positions, with a total amount of more than 6.2 billion yuan. The largest liquidation amount reached 14.68 million US dollars, equivalent to a contract of 96.18 million yuan.

(Author: Chen Zhi, editor: Bao Fangming)

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