BTC Returns to $66,000: Is This a Sign of Recovery?

This rebound occurred against a backdrop of low trading volume, with sellers dominating the market.

Written by: Blockchain Knight

Bitcoin has once again crossed the critical threshold of $66,000 after more than a month, with a cumulative rebound of over 12%.

Despite the price recovery, the market atmosphere and the signals from the funding structure are quite contradictory, suggesting that this is not a reassuring rally.

In the past 30 days, the average daily trading volume of Bitcoin spot transactions was only $5.1 billion, nearly 30% lower than the historical average since 2019. While the price is rising, the number of participants has not increased, and trading volume has actually shrunk.

In other words, this rebound occurred in an environment of low trading volume, with sellers even dominating the market.

In such an environment, prices can be very sensitive to changes in buy and sell orders, allowing for upward movement with minimal capital. Conversely, if selling pressure increases, the downward speed may not be slow either.

The derivatives market has also not provided signals indicating a return to normalcy. The open interest in perpetual futures has dropped from $35.7 billion over two months ago to around $29.4 billion now. Although the funding rate has turned positive, it remains far below historical averages.

More notably, the premiums on put options in the options market are still nearly 50% higher than those on call options. This level of skew has only been more extreme than it is now for about 10% of the time since 2021. Traders are still spending money on insurance, indicating that they do not believe this rally will be sustained.

On a positive note, the U.S. spot Bitcoin ETF has recorded several days of net inflows, totaling over $930 million, marking the longest consecutive inflow since early May. In the previous two months, approximately $2.4 billion had flowed out.

Additionally, whales holding between 1,000 and 10,000 BTC have accumulated about 66,700 BTC over the past 60 days, marking the largest scale of accumulation for this group since February of this year. Large funds have been buying during the panic selling by retail investors, which has objectively tightened the market's circulating supply.

Moreover, about 78.5% of Bitcoin's supply has not moved for at least six months, with over 60% remaining untouched for more than a year.

This percentage is also on the rise. Historically, when it exceeds 60% and continues to increase, subsequent returns are often favorable. However, history is history, and the current major issue is whether new demand can be sustained.

Of course, there are also some concerning factors in the market. The Federal Reserve's interest rate meeting is approaching next week. Although the market widely expects no changes, the statement after the meeting will be crucial. After all, oil prices have been steadily rising recently, adding considerable uncertainty to the inflation outlook.

Bitcoin's rise to $66,000 has technically broken the downward structure, which is a positive aspect. Coupled with the funding sources supporting this rise being ETFs and whales—both relatively smart and patient money—there seems to be a reason for optimism.

However, the negative aspects are also evident. Retail investors and active traders have not yet caught up, the spot trading volume is too low, and the derivatives market is still primarily focused on preventing declines. Additionally, there are significant uncertainties in the macroeconomic landscape, and the stability of this situation still needs to be tested.

Therefore, moving forward, in addition to closely following macro-level news and market trading data, it is crucial to pay attention to whether Bitcoin can firmly hold above $66,000; otherwise, the tests will continue.

If a downward trend is established, this rebound may resemble a tentative offensive led by large funds rather than a signal of having emerged from the bottom.

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