Bessent announces that President Trump could impose April-like tariffs in August.
Bitcoin market sentiment surged above 70 last week, signaling growing optimism and FOMO in the market. Especially after multiple pullbacks resulted in quick recovery, revealing key details about the state of demand.
Bitcoin bulls echoed their resolve during the week as the price briefly pushed above $110,000. Moreover, excitement around the cryptocurrency was on the rise with the expectation that it could potentially push to new historic highs.
While the latest market conditions favored the bulls, analysts and investors also noted the potential for another major pullback for BTC price. Bitcoin funding rates dipped during the weekend, confirming the rise of bearish expectations.
The funding rates also dipped into negative territory, signaling a surge in short positions. However, this only led to higher liquidations for traders executing short positions as the price maintained upside momentum.
BTC’s current momentum underscores the period of relative calm and favorable conditions. However, those conditions may soon be disrupted.
The same calm period could potentially extend to the rest of July, during which the cryptocurrency will have a chance to push higher. However, August could potentially pave the way for another major sell-off as tariff wars make a comeback.
The U.S Treasury Secretary Scott Bessent recently announced that President Trump will reignite trade wars in August. According to the announcement, the tariffs will be imposed on countries that did not reach a trade deal with the U.S and could be a severe as those imposed in April.
Bitcoin and altcoins responded with heavy liquidity outflows the last time Trump escalated the trade wars. That was partly because of the size of the disruption that it caused across the world.
More than 100 countries did not secure a trade deal with the U.S. The pause on tariff wars would have kicked off in July but was pushed back for three more weeks. This could potentially pave the way for things to change before Trump pulls the trigger once more.
The situation highlighted President Trump’s administration’s efforts to salvage the situation amid the latest dollar decline. The period before the tariff war resumes may allow risk-on assets like Bitcoin to push higher.
The level of spot involvement relative to derivatives activity during a rally historically revealed a lot about BTC price. That was the case during the latest rally, which was underpinned by a noteworthy surge in futures volumes on Binance.
A recent analysis by CryptoQuant analyst Darkfost highlighted the significance of the ratio of spot to futures volumes on Binance based on historical data.
According to the analysis, the average ratio was about 0.26 since 2019. This meant that $4 was invested in derivatives for every $1 invested in the spot segment.
Darkfost noted that the ratio favored more stock participation during periods of relative calmness. On the other hand, the ratio favored derivatives during more volatile BTC price periods. According to the latest data, the ratio demonstrated a larger focus on derivatives.
The observation was consistent with the prevailing situation, which underscored a rally driven by heavy speculation. In addition, the prospects of another tariff war could potentially encourage spot investors to pull funds and support a speculative approach in the short term.
Based on the analysis, it was clear that a strong resurgence in spot activity could be a solid indicator for the next major bullish breakout. institutional flows in the next 3 or 4 weeks could also be the canary in the coal mine that will complement market sentiment.
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