Bitcoin Holds $102,000 Support Despite $170M Liquidation

Bitcoin (BTC) has shown remarkable resilience, maintaining its upward trajectory despite a $170 million liquidation of leveraged positions. The cryptocurrency's price held steady at the $102,000 support level on May 19, following a sudden $5,000 correction after reaching $107,090. This resilience is indicative of strong buying pressure in both the spot and futures markets, suggesting that the odds of reaching a new all-time high in the near term remain high.

The annualized one-month futures premium for Bitcoin has remained close to 6%, within the 5% to 10% neutral range. This data suggests that the buying pressure is primarily coming from the spot market rather than leveraged bets, which is a positive sign for the sustainability of the current rally. The limited use of futures leverage and weak stablecoin demand in China further support the notion that Bitcoin’s current rally is sustainable.

Some analysts attribute Bitcoin’s recent correction to comments by Japan’s Prime Minister Shigeru Ishiba regarding the country’s fiscal situation. Yields on Japan’s long-term government bonds soared to their highest level ever on May 19, signaling a lack of trust among traders. Japan is the largest holder of US Treasury bonds, and investors are concerned about contagion risks at a delicate moment for the global economy. The downgrade of the US government’s long-term credit rating by Moody’s rating agency has also played a significant role in limiting Bitcoin’s upside, particularly as its correlation with the S&P 500 index has stayed above 80% since early May.

Despite these challenges, Bitcoin has shown resilience in the face of negative news. The cryptocurrency’s price held steady after the announcement of a class-action lawsuit against Strategy’s top executives, claiming “false and/or misleading statements” regarding risks associated with Bitcoin’s investment. The fact that the $102,000 support held amid increased global economic uncertainty, combined with strong spot buying and resilient derivatives metrics, provides every indication that Bitcoin is well-positioned for further price gains.

The demand for stablecoins in China is another key indicator of Bitcoin’s potential for reaching a new all-time high. Periods of excessive optimism usually lead to stablecoins trading above fair value, which is not a healthy indicator. However, USD Tether (USDT) has been trading at a slight 0.4% discount in China, meaning Bitcoin’s price increase has likely not been driven by FOMO (fear of missing out). The absence of excessive leverage on Bitcoin futures and the lack of desperate inflows into Chinese markets are key ingredients for sustainable price gains, paving the way for a more solid bullish momentum above $105,000.