Why is Bitcoin price up today?

Bitcoin (BTC) rebounded by 6.40% on July 6, reaching $56,975, after hitting a five-month low the previous day. This recovery indicates that traders are beginning to overcome the bearish effects of Mt. Gox’s $8 billion BTC reimbursement and the recent BTC selloffs by the U.S. and German governments.

Bitcoin analysts attempt to calm panic sellers

Over the past 24 hours, top crypto analysts and influencers have been working to downplay the impact of Mt. Gox and the BTC selloffs by the German and U.S. governments on Bitcoin’s long-term bullish outlook.

That includes Ki Young Ju, founder and CEO of on-chain analytics platform CryptoQuant, who reminded traders that the governments had control over $8 billion worth of BTC, which is merely 4% of the total $225 billion that has flown into the Bitcoin market since 2023.

Source: X

In other words, the Bitcoin market has adequate liquidity to absorb the impact of government-led BTC selloffs, especially amid fears that the German government may dump the remainder of its Bitcoin holdings—about 42,000 BTC as of July 6—in the coming days.

Similarly, independent market analyst Trader Tardigrade likens the current Bitcoin market selloff to past black swan events, which led to sharp rebounds and subsequent extended bull cycles.

He noted:

“In 2016, 2020 and 2024, $BTC moved in the same pattern. Besides 2020, $BTC Fakeout was seen below the trendline. After reclaiming above trendline, a Bull Run follows,”

BTC/USD weekly price chart. Source: Trader Tardigrade

Analyst Rekt Capital argues that the current Bitcoin market selloff is part of the typical cycle that occurs after a Bitcoin halving event. In this post-halving trend, Bitcoin often experiences a significant price drop for several months as the market adjusts to the new supply dynamics.

BTC/USD monthly price chart. Source: Rekt Capital

However, as the reduced supply begins to impact the market, the price eventually recovers and often enters a strong upward trend due to lower supply and higher demand driving prices up.

Bitcoin traders playing catchup to stocks

Bitcoin’s sharp recovery today takes cues from the U.S. stock market’s rally to a record high.

In a post-holiday session with thin trading volume, the S&P 500 reached its 34th record high of the year. Equities rebounded after a volatile period following data that showed a slowdown in U.S. hiring and the highest jobless rate since 2021.

U.S. nonfarm payroll data as of June 2024. Source: Bloomberg

As a result of disappointing jobs data, Wall Street bets are now pointing to a 72% probability of a rate cut in September compared to 55.4% a month ago. Rate cuts are typically bullish for Bitcoin and other riskier assets, given they reduce the opportunity cost of holding lower-yielding U.S. Treasury notes.

Related: How US job market slump could boost Bitcoin prices

For instance, Bitcoin exchange-traded funds (ETF) attracted $143.1 million to its coffers on July 5 when the U.S. jobs data was released. Earlier in the week, these ETFs had witnessed two days of consecutive outflows.

Bitcoin ETF daily net flows in July. Source: Farside Investors

Bitcoin futures funding rate jumps

Bitcoin’s price recovery further accompanies a strong jump in its funding rates in the futures market, even though open interest (OI) has declined significantly in the same period.

As of July 6, Bitcoin Futures’s funding rate was net positive at 0.178% per week, up from 0.044% per week two days ago. Meanwhile, the OI, which reflects the total number of unsettled contracts, dropped to around $28 billion from $31.64 billion in the same period.

BTC OI and OI-weighted funding rates. Source: Coinglass

Simply put, traders are confident in the upward price movement and are willing to pay higher rates to maintain their long positions.

Bitcoin’s lower OI and higher funding rates furtherindicate a phase where weaker hands are exiting their positions while more confident traders or institutions are maintaining or increasing their exposure, anticipating a price increase.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.