On February 5th, Bitcoin experienced a spike, surging past $43,500 as Wall Street opened. This move was a reaction to the turmoil in Chinese stock markets, which had a spooking effect on investors.
China’s stock losses have raised concerns about a potential recession. Data from Cointelegraph Markets Pro and TradingView indicated that Bitcoin reached local highs of $43,515 on Bitstamp, marking a new February record for BTC prices.
The Chinese CSI 1000 index had a single-day loss of 8%, leading Chinese authorities to implement further controls on short selling. Some observers, like The Kobeissi Letter, have raised questions about whether China might be on the verge of a recession, noting a “disconnect” between large and small-cap stocks.
A response on social media platform X (formerly Twitter) pointed out that China’s market had lost a staggering $7 trillion in value over the last three years.
Bitcoin’s volatility was also influenced by a notable increase in open interest, which reached $775 million. This information was shared by J. A. Maartunn, a contributor to the on-chain analytics platform CryptoQuant. Additionally, there were lower outflows from the Grayscale Bitcoin Trust (GBTC) compared to previous days, with around 2,600 BTC exiting the trust, continuing a positive trend.
Analyzing the composition of the order book, Keith Alan, co-founder of the trading tool Material Indicators, issued a new warning regarding BTC’s price. He pointed out that Bitcoin still lacked liquidity just below the current spot price, making a return to $42,000 relatively easy.
However, when looking at the broader picture, liquidity was increasing significantly lower, at around $25,000. This suggests a growing sentiment for a potential price dip. Alan clarified that this doesn’t necessarily mean an immediate drop to that level, but it does indicate the presence of sentiment for it.
Moreover, Alan noted that the ask liquidity ladder above the spot price was also moving lower, implying that a swift move to $45,000 or higher in the short term was likely.