Bitcoin traders share their ‘PvP’ views on BTC’s recent price weakness

Bitcoin’s price whipsaws were the dominant feature on display over the past week as crypto and equities markets digested newly released US economic data, and a startling uptick in Treasury yields was followed by a sharp correction in BTC (BTC) price, the DOW and S&P 500. 

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Looking beyond the traditional finance markets, Bitcoin’s Jan. 6 rally above $102,500 led technical traders to believe that an ominous head-and-shoulders pattern had been invalidated and the possibility of a dip below $90,000 had been avoided. In addition to the negative impact rising Treasury yields had on markets, rumors that the US Department of Justice had received court approval to sell $6.5 billion worth of Bitcoin seized from Silk Road added to the bearish sentiment that was driving price action within markets. 

Popular options trader Tony Stewart tweeted his view on how the market’s most intelligent traders would react to the news of the week, saying, 

“Snap decision based on headlines without deeper TLDR. This is the CT way. In this case, bears will push narrative lower until momentum repels.”

Among crypto traders, there’s a unique strategy to interpreting sentiment data and pending yet unconfirmed bearish events to one’s advantage. A brief outline of this is outlined below: 

• Jan. 9 was a National day of mourning for former US President Jimmy Carter. Thus, all TradFi markets were closed, meaning there was no spot Bitcoin ETF buying or selling. This reduced volumes or at least led to an assumption that some traders might attempt to capitalize on smaller flows on that day.
• Bitcoin was already at a structural level of weakness, amplifying the opportunity for those who were trading to capitalize on the bearish narrative and push prices lower while possibly also buying spot. Ie., big boys could open large short positions to liquidate those who longed the recent lows, but at the same time, they are buying spot coins elsewhere, and possibly appropriately hedged in options markets
• The DOJ news and surrounding media and Crypto Twitter “influencer analyst” FUD about Silk Road Bitcoin liquidation approval amplified the narrative on an already bearish day in equities and crypto, which essentially provides the opportunity to reposition in derivatives markets and capture discounted spot Bitcoin before the expected to the moon rally happens when President-elect Trump is inaugurated on Jan. 20. 

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To add more color to the above, Cointelegraph spoke to 1971 Capital chief investment officer Brian Russ to explore how he and his firm were digesting this week’s news and price action. 

Russ said that “the exact path is hard to define simply because of multi-variance,” adding that the market now has “many large global players, so it’s hard to isolate one group of actors as impacting price on the margin.” 

“Derivatives dominate daily flows for BTC so these games are always played. At a $2 trillion market cap for Bitcoin, it’s MUCH harder to move this market. In other words, the type of manipulation that was more common last cycle is more difficult now.”

Regarding TradFi-linked Bitcoin trading volumes on Jan. 6 (a national day of mourning for former US President Carter), Russ explained that “ETFs only represent roughly 3% of the daily average volume ($1.5 billion versus $50 billion), so it’s not a huge factor that markets were closed on this day.” 

Russ said, 

“The Silk Road Bitcoin is $6.5 billion, so 13% of average daily volume, and it could be significant if sold all at once, but that’s unlikely. The market also likely priced in those sales on the news this week so I think the impact will be muted. Those coins may be sold over-the-counter by Coinbase also which would not move the price materially even at that size.”

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Considering the potential for speculators to move the price needle by exploiting light liquidity zones and bearish news headlines, Russ said, 

“Specifically, what I agree with is that large speculators will opportunistically move prices around key stop and leverage levels here, and we should expect a volatility expansion. For that reason, dips will likely be short, so limits should be in now.”

Traders agree that ‘PVP’ is always happening in crypto

Generally, traders seem to agree that bearish crypto headlines tend to move the price needle more than the actual event occurring since markets have a tendency to price in events once the shock of the news headline contrasted against the actual asset fundamentals take away some of the perceived impact of a potential black swan event.

Take, for example, Pear Protocol founder and former equities trader HUF, who said, 

“Here’s my playbook, guys. When the DOJ coins move to Coinbase Prime (Arkham data alerts), we buy that dip because the coins are likely already sold and just moving.”