In brief
A four-year high in CTA exposure signals a potential market deleveraging event that could put pressure on Bitcoin.
Downward revisions in jobs data are fueling speculation of a more aggressive Fed rate-cutting schedule.
After a recent sell-off, Bitcoin is expected to enter a period of “chopsolidation” rather than a major collapse.
Bitcoin’s slow strut over the weekend has partially undone last week’s losses, but analysts remain cautious.
While the top crypto is up 1.5% from Saturday’s low of $112,692, its recovery may be short-lived due to mounting headwinds, and a sharp reversal is possible, according to experts Decrypt spoke to on Monday.
The first major headwind is an overexposed US equity market. Nomura data shows that Commodity Trading Advisor (CTA) positions are at 110% long equity exposure—a level not seen in four years.
This has driven “market momentum,” as Han Qin, CEO of tokenized investment platform Jarsy, told Decrypt, but he adds that this also makes the market “more vulnerable to sharp reversals.”
A broad equity pullback triggered by CTA deleveraging could cause risk assets, including Bitcoin, to face short-term pressure.
This pressure from traditional markets is coupled with sustained selling from within the crypto space itself.
Sean Dawson, head of research at on-chain options platform Derive, told Decrypt that options traders are bracing for a pullback, targeting $100,000 to $80,000 puts. These traders are expecting a price reversal of somewhere between 10% and 30% over the next month.
The outlook is made even more sensitive by recent macroeconomic data. The downward revisions of the Nonfarm Payrolls for May and June by 258,000 have put the market on edge.
A Period of “Chopsolidation”
Amidst these bearish signals, not everyone anticipates a dramatic crash. Maarten Regterschot, a CryptoQuant analyst, told Decrypt that he doesn’t expect Bitcoin to break below $112,000.
Instead, he anticipates a period of “chopsolidation” following the recent short-term holder selling spree, suggesting a period of sideways trading is more likely than a full-blown price collapse.
While some analysts are hinting at a more aggressive Fed pivot, that potential catalyst is still months away.
“Fed pivot is coming,” said Fundstrat Capital CIO Tom Lee in a tweet, acknowledging the severity of the downward revisions to jobs data.
This sentiment is echoed by Jamie Cox, managing partner at Harris Financial Group, who told Fortune that there “might be a 50-basis-point” rate cut.
The CME’s FedWatch Tool shows an 81.7% chance of a 25 basis point rate cut in September,
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