Crypto
A Bitcoin ATM in Hong Kong...
A bitcoin ATM (S3studio/Getty Images)

Bitcoin passes $81,000 as optimism builds

One expert said “these levels could represent the critical ‘demarcation line’ between bull and bear market.”

Bitcoin not only broke the $80,000 level but hit $81,600 Tuesday morning, its highest point since late January. Optimism for progress on the CLARITY Act, as well as the Iran ceasefire holding despite tensions, are among the factors driving this rally.

Rajiv Sawhney, head of international portfolio management at Wave Digital Assets, told Sherwood News that bitcoin’s move was “very simple.”

“De-escalation on the US-Iran situation in the short term. Until we get more clarity on whether the attack on US warships will escalate, I think in general risk assets will trade heavily,” Sawhney said.

Another positive indicator for bitcoin is the declining ratio of short-term holder to long-term holder supply, indicating a more stable market shaping up.

“This value is near the low band of 15.1%, highlighting a strong presence of long-term holders. This suggests a market structure characterized by higher conviction and lower liquidity, potentially leading to more stable market conditions with reduced speculative activity,” Glassnode analysts said in a report.

STH/lTH
(Glassnode)

Bitcoin ETFs, another support for bitcoin’s price, remain strong, with $532.21 million in inflows on Monday, making their total for May $1.16 billion, according to SoSoValue.

Sentiment is cautiously optimistic. Max Kahn, CEO of Digital Wealth Partners, told Sherwood that breaking through $80,000 is one thing, but holding it will depend on whether the current drivers remain intact — namely, ETF inflows and a supportive macro backdrop.

“Bitcoin has become increasingly sensitive to liquidity and interest rate expectations, so maintaining strength at these levels will likely require continued institutional demand and stable inflation and policy signals. Short-term volatility around key levels should be expected,” Kahn said.

Bitfinex analysts echoed the sentiment, saying that the macro backdrop has become slightly less hostile, removing some pressure from risk assets.

“But with no clear liquidity tailwind and persistent geopolitical risk in the Middle East, bitcoin still requires strong spot-led demand to move decisively higher,” they said.

Finally, some experts said that the recent rebound is “somewhat stretched in the short term,” even though “cryptoasset and cross-asset sentiment have become quite bullish,” according to André Dragosch, Bitwise’s head of research in Europe.

btc cryptoasset
(Bitwise)

Dragosch told Sherwood the implication is that we probably won’t cross the critical cost bases around $80,000 to $81,000 sustainably, as positioning and sentiment are already somewhat stretched.

“High sentiment readings tend to be a contrarian indicator as they tend to signal imminent buyer fatigue. These levels are somewhat critical because of a confluence of different cost bases, such as the True Market Mean, the short-term holder cost basis, and the average US spot bitcoin ETF cost basis,” Dragosch said.

Above/below these levels, Dragosch said the average bitcoin investor has unrealized profits/losses, and as such, these levels could represent the critical “demarcation line” between a bull or bear market.

“Personally, I do believe that bitcoin will ultimately reclaim these levels, but it will probably happen alongside a stronger demand impulse from institutions,” he said.

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Hyperliquid reclaims all-time high

HYPE, the native token powering perpetuals exchange Hyperliquid and its underlying blockchain, rebounded to reclaim its all-time high previously set at the start of the month.

Treasury firms Hyperliquid Strategies and Hyperion DeFi have also rallied as the token increased double digits in the last 24 hours to trade as high as $76.70, rising past its record price set nearly two weeks ago, according to CoinGecko. In the interim between all-time highs, HYPE pulled back to around $53.

The token has several tailwinds, the first coming from ETF flows. Since their inception in May, HYPE ETFs have yet to record negative weekly outflows, posting a cumulative total net inflow of $171.8 million, per SoSoValue.

The second comes from Hyperliquid spending basically everything it earns in fees to buy HYPE, a mechanism embedded into the protocol’s codebase.

The venue’s buyback funding mechanism is set to add a new source of yield. Validators of the network activated “AQAv2,” which means stablecoin deployers will share about 90% of reserve yield revenue on their supply within the protocol.

Around $6.1 billion of Circle’s USDC resides in Hyperliquid, per DefiLlama. Accrual begins on August 26 and the first payment is made on October 3, the network announced in its Discord channel last week.

A substantial amount of capital is riding on different positions of HYPE. In total, a move down to under $53 would result in the liquidation nearly 1.8 million HYPE worth of leveraged long positions on the on-chain perps venue, or $131.7 million, data from CoinGlass shows. For the upside, a climb above $100 results in the liquidation of more than 3 million worth of leveraged HYPE short positions, or $221.5 million.

HYPE’s rebound to all-time high comes after Michael Selig, chair of the Commodity Futures Trading Commission, defended his agency’s decision to approve regulated perpetuals, or futures contracts without expiration dates, CNBC reported on Monday.

Last month, the CFTC approved bitcoin perpetual futures trading in the US through regulated prediction markets firm Kalshi and an affiliate of centralized exchange Coinbase.

“Perps are highly likely to become lightly regulated and thus approved in the US,” said David Pakman, head of venture investments at CoinFund.

“We expect to see perps for many different types of assets, from commodities to equities,” Pakman told Sherwood News.

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Crypto market snaps back as sentiment lifts, with altcoins from ethereum to XRP soaring

The market capitalization of the crypto industry has jumped around $83.2 billion in the last 24 hours, with privacy-focused token Zcash and worldcoin, the native cryptocurrency of the network backed by OpenAI CEO Sam Altman, leading market gains, jumping over 22%.

But the last 24 hours have been good across the board:

Investors have been eager to see some positive signs around the Iranian conflict ending, coupled with hopeful outlooks around the CLARITY act, both breathing some life into assets, Kairos Research cofounder Ian Unsworth told Sherwood News.

Simon Shockey, a crypto strategist at crypto wallet infrastructure firm Privy, said the upswing stems from several things converging. He pointed to how alt markets broadly were very oversold following the bug found in Zcash that shook confidence.

Friday, Zcash founder Zooko Wilcox said Anthropic didn’t find any more serious bugs with the Zcash protocol after Shielded Labs requested the AI firm run a security audit of the network with Mythos.

Shockey added that the pool of willing sellers has dwindled. Even if structurally, AI is a much more compelling and asymmetric bet in the eyes of allocators, many of these crypto assets have simply run out of marginal sellers despite some shorter-term narrative-driven pumps. The only people left to sell at this point are the teams themselves and VCs.

Net-net: oversold conditions plus exhausted seller bases plus a macro backdrop thats stabilized equals a snapback, especially in names that have real usage or community conviction behind them,” Shockey told Sherwood.

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