Bitcoin's market sentiment surpassed the 70 mark last week, indicating an increase in optimism and a widespread FOMO effect. After several mild corrections but swift recoveries, the market has revealed important signals regarding current demand.
The bulls are also showing determination as BTC's price briefly surpassed $110,000 during the week. At the same time, the enthusiasm surrounding this cryptocurrency is increasing, with expectations that the king of cryptocurrencies could reach new historical highs.
However, although current market conditions still favor the bulls, analysts and investors are warning about the risk of a deep correction occurring next. This signal is reinforced as Bitcoin's funding rate decreased over the weekend, indicating rising bearish expectations.
The funding rate of Bitcoin has also shifted into negative territory, indicating a significant increase in Short positions. However, this has led to a higher rate of liquidations for traders betting on Short, as prices continue to maintain their upward momentum.
The current momentum of BTC reflects a relatively stable phase and favorable market conditions. However, this stability may soon be disrupted.
Trump reignites the trade war in August, threatening Bitcoin's dominance.
According to experts, the current peaceful phase could last for the remainder of July, allowing Bitcoin to continue its upward trend. However, August could open the door to a significant sell-off as trade tensions return.
U.S. Treasury Secretary Scott Bessent recently announced that President Trump will restart trade wars in August. According to the announcement, tariffs will be applied to countries that have not reached trade agreements with the U.S., and the severity may be comparable to the tariff increases in April.
Bitcoin and altcoins reacted with significant capital outflows from the market during Trump's latest trade war tensions. Part of the reason stems from the severe disruptions this policy causes globally.
Over 100 countries have yet to reach a trade agreement with the United States. The initial suspension of the trade war was expected to begin in July but was delayed by three weeks, opening up the possibility that the situation could change before Trump officially takes action again.
This development indicates that the Trump administration is making efforts to salvage the situation, especially in the context of the U.S. dollar's recent weakness. The period before this trade war resumes could facilitate risk assets like Bitcoin to continue their upward trend.
The volume of Bitcoin futures on Binance reveals important details about the latest price surge.
The level of participation in the spot market compared to derivatives activity during each price surge often reveals a lot about Bitcoin's price trend — and this is true for the recent surge. This time's increase is backed by a significant boom in futures trading volume on Binance.
A recent analysis by analyst Darkfost from CryptoQuant highlighted the significance of the ratio between spot trading volume and futures contracts on Binance, based on historical data.
According to this analysis, the average ratio from 2019 to now is about 0.26 — meaning for every $1 invested in the spot market, there are about $4 poured into the derivatives market.
Darkfost notes that this ratio tends to lean towards spot trading in relatively stable market phases, whereas derivatives trading dominates during high volatility. According to the latest data, such a ratio indicates that the market is focusing more on derivative instruments.
This assessment aligns with the current situation, where the recent price surge is mainly driven by strong speculative activity. Additionally, the risk of a new trade war could cause spot investors to pull out and shift to short-term speculative strategies.
Based on the analysis, it can be seen that if spot activity recovers strongly, it will be a solid signal for the next major bullish breakout. At the same time, institutional cash flow in the next 3 to 4 weeks could also be an early sign of market sentiment being solidified or changing.