Mike Smith
Aug 25
The market got a rare combination of soft rhetoric from the monetary authorities and thin liquidity over the weekend. Immediately after Jerome Powell's speech, sentiment shifted into risk-on mode: BTC added almost 4%, stretching momentum from $112,500 to $116,900. But as early as Sunday, that spurt was erased by a sharp reversal. Within minutes, the quote slid below $112,500 and fumbled to the $111,000 area, which for a weekend with a sparse order book looks like a classic flash crash. Disproportionately large selling in a thin market was the trigger for acceleration downward and removed layers of pent-up demand.
The onchain data indicates the activity of a large holder who disposed of a bundle of about 24,000 BTC. The episode illustrates how fragile the momentum is, fueled by expectations of an imminent rate cut but not backed by sustained capital inflows. Word of mouth raised the likelihood of policy easing in the coming months, the dollar index weakened, stock indicators picked up gains, and it looked like BTC was capable of consolidating above $115,000. However, as soon as a one-off large supply entered the stream, the market microstructure showed vulnerability: spreads widened, liquidity left in stages, and slippage amplified the decline.
The signal from derivatives was equally telling. The 25-delta risk reversal metric on BTC options has held in the negative zone for maturities through December, meaning puts are more expensive than calls and downside insurance is valued higher than the right to participate in the upside. Such a skew reads as persistent hedging and unwillingness to believe in a cloudless continuation of the trend. At short maturities, volatility expands and the distribution of open interest shifts to the strikes below the current spot. Cumulatively, this suggests that professional participants continue to pay a premium for protection and expect increased amplitude of fluctuations.
The technique adds to the skepticism. The attempt to consolidate above $115,000 quickly ran out of steam and the $112,000-$13,000 range is back to being a battleground. Moving averages are losing angle, daily oscillators are cooling, and localized breakdowns are accompanied by a poor delta, indicating a lack of aggressive demand. If buyers hold $111,000, there remains a chance for a pullback to $114,000-116,000 and a retest of the seller at circular levels. Losing this support will widen the downside corridor and push for a test of lower areas where dense histories of past consolidations stand.
The main lesson of the current day is that BTC volatility is fueled by two motors simultaneously - macro expectations and actions of large holders. The former set the background and the cost of money, the latter are able to rewrite the scenario of one session with a single order. Even if September does bring a rate cut, neutralizing the fear of a sudden sell-off will take time, and the risk premium will continue to be reflected in option prices. For the bulls, the challenge at a minimum is to build an upward move based on sustained spot demand and restored liquidity in the stacks, rather than on random bursts of news. Only such a structure can regain the initiative and turn short-term bounces into a meaningful trend.
