Will Hong Kong’s interbank rates stay elevated after the recent spike?

Economic

Summary:

Hong Kong’s HIBOR swung wildly due to HKMA interventions defending the currency peg. While further spikes look limited by Fed cuts and narrowing spreads, tight liquidity and IPO demand should keep rates moderately elevated.

Unprecedented volatility in HIBOR

Hong Kong's interbank offered rate (HIBOR) has experienced extraordinary volatility in 2025. The overnight rate plunged from 4.50% to nearly 0% in May, before rebounding sharply to 2.9% as of today. Similarly, the one-month HIBOR surged from approximately 0.9% to 2.6% within a week.

This article explores the key drivers behind these dramatic movements, offers forward-looking insights, and discusses implications for market participants.

Rates across all tenors rose for the first time since April 2024 on Tuesday as USD/HKD approaches the top of the currency peg range. This dramatic movement reflects the complex interplay between currency intervention and banking system liquidity.

We will explore the key drivers behind these drastic moves, forward-looking views and implications for traders in this article.

Figure 1: Hong Kong's interbank offered rates and USD/HKD exchange rate

Understanding the USD-HKD currency peg

Hong Kong’s monetary policy is anchored by the Linked Exchange Rate System (LERS), established in October 1983. This framework maintains the Hong Kong dollar within a narrow band of HK$7.75-7.85 per US dollar.

The system emerged after severe currency instability in summer 1983. Public confidence in the Hong Kong dollar had collapsed, creating intense selling pressure on the local currency.

Under LERS, the Hong Kong Monetary Authority (HKMA) defends both ends of the band. It sells HKD when the currency strengthens beyond HK$7.75 per USD, and buys HKD when it weakens past HK$7.85 per USD. The monetary base remains fully backed by US dollar assets. This provides credibility and ensures Hong Kong can function as an international financial centre despite its small, open economy structure.

Currency peg defence and HIBOR volatility

In early May, the HKD approached the strong-side limit of HK$7.75 per USD, prompting the HKMA to sell HK$129 billion in exchange for USD to maintain the peg. This intervention led to a surge in banking system liquidity and a collapse in interbank rates, with overnight HIBOR falling from over 4% to near zero within weeks.

The sharp decline in HIBOR created a significant interest rate differential with USD rates. The one-month SOFR-HIBOR spread widened to over 370 basis points, incentivising carry trades, i.e. borrowing low-cost HKD to invest in higher-yielding USD assets. This dynamic helped reverse the declining HKD loan-to-deposit ratio, which had been falling since May 2023.

As HKD loans increased, the currency shifted towards the weak side of its trading band. Between June and August, the HKMA intervened 12 times to prevent the HKD from breaching the HK$7.85 threshold. These actions helped stabilise the currency around HK$7.80, but also led to a rapid withdrawal of HK$120 billion from the banking system. Consequently, Hong Kong’s aggregate balance fell from over HK$173 billion to HK$54 billion in just two months.

Figure 2: Supply and demand dynamics of HKD

Market implications of elevated HIBOR

In the short term, rising borrowing costs may dampen investment appetite and exert pressure on Hong Kong’s capital markets. Higher interest rates increase the cost of financing for both institutional and retail investors. For businesses, this means more expensive funding for projects. For stock traders, particularly those using margin accounts or leveraged strategies, elevated HIBOR translates into higher margin financing costs. This can reduce trading volumes, and ultimately weigh on market liquidity and sentiment.

Sectoral impacts vary. The recovery in HIBOR offers some relief to local banks, which had faced projected low double-digit profit declines due to compressed net interest income (NII). Institutions with large HKD deposit bases, such as Bank of East Asia and Bank of China Hong Kong, stand to benefit if HIBOR remains at current levels.

Conversely, real estate companies may underperform when HIBOR rises, as mortgage rates in Hong Kong typically follow interbank rate movements. Higher borrowing costs make property purchases less affordable, which can reduce demand. Between 23 May and 13 August, during a period of ultra-low HIBOR, the real estate sector within the Hang Seng Composite Index returned 15.7%. This outpaced the broader index, which gained 11.3%. However, this outperformance may not continue if HIBOR remains elevated.

HIBOR outlook

In our June publication, we anticipated that triggering the HKD’s weak-side convertibility undertaking would lead to a normalisation of interbank rates. Much of this adjustment has now occurred, and we believe further upside in HIBOR is limited.

Two key factors support this view:

Federal Reserve policy: The Fed’s projected two rate cuts this year are expected to cap USD funding costs, indirectly limiting HKD rate increases.

Narrowing rate differential: The USD-HKD interest rate spread has narrowed significantly, suggesting that most of HIBOR’s recovery is already priced in. If the one-month differential reverts to its medium-term average of 0.9%, the upside potential for 1M HIBOR is limited to 80–90 basis points.

However, we do not expect rates to return to the near-zero levels seen in June. One major reason is the sharp contraction in Hong Kong’s aggregate balance due to HKMA’s currency interventions. A lower aggregate balance tightens liquidity in the banking system, placing upward pressure on interbank rates. The Hong Kong Association of Banks has warned that HIBOR could rise sharply if the balance drops below HK$50 billion.

Additionally, a robust pipeline of initial public offerings (IPO) is likely to support HKD demand. Christopher Hui, Secretary for Financial Services and the Treasury, recently disclosed that 210 companies are undergoing the listing process. High-profile candidates may include fashion retailer Shein, previously valued at $100 billion. This sustained IPO momentum should provide a natural floor for HKD strength and interest rates.

Source: ig

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Winkelmann

Economic

Political

On a quiet corner of Tehran’s mostly residential eastern suburbs, dozens of administrative staff busily file paperwork. Tea is brought in by an assistant, while young men on military service are ordered to fetch lunch.It’s a mundane picture of office life in a city of 10 million people. There’s little to suggest it’s part of an organization that’s had a profound influence on security in the Middle East for almost half a century and has often posed a direct challenge to the US and its allies.

This is the human resources department of Iran’s Islamic Revolutionary Guard Corps., an organization known in the West for its elite forces defending Iran’s theocratic leadership, its proxy militias in the Middle East — and whose tentacles run so deep that efforts to destroy it are likely to make it stronger.Iran’s direct military confrontation with Israel over 12 days in June was the most damaging in the IRGC’s history, killing most of its top echelon and forcing a restructuring of Iran’s strategic decision making. And yet the bombing has left the group more critical to the survival of the Islamic Republic than ever before, according to observers.

The Guard comprises a navy, ground troops, aerospace, an elite unit called the Quds Force and the Basij volunteer paramilitaries. It also has its own intelligence organization that’s known to directly compete with — and sometimes work against — the government’s Ministry of Intelligence.The IRGC also runs hospitals, universities, news agencies and TV stations. It has vast business holdings, including a huge engineering conglomerate involved in building oil pipelines and even Tehran’s metro system. Estimates of the number of direct IRGC personnel range up to almost 200,000.

The announcement of a new National Defense Council this month underscored the Guard’s expanding role and influence on the state in the wake of the attacks by Israel and the US, which were designed to stop Iran producing nuclear weapons. The new body will be headed by President Masoud Pezeshkian and dominated by IRGC veterans and serving generals, according to the state-run Islamic Republic News Agency.“Israel’s attack reinforced the IRGC’s position in the Islamic Republic,” said Abdolrasool Divsallar, an expert on Iran’s military and security strategy and adjunct professor at the Universita Cattolica del Sacro Cuore in Milan. “The war affirmed just how important the IRGC is.”

Few organizations in the world have drawn as much fascination and condemnation from the West as the IRGC. Its so-called Axis of Resistance abroad includes proxies in Syria, Hezbollah in Lebanon and Hamas in Gaza — all of which have now been critically depleted by Israeli forces.At home, it’s mostly feared by ordinary Iranians who associate it with the hardline ideology of Supreme Leader Ayatollah Ali Khamenei, crackdowns on dissent, corruption and a contempt for an increasingly secular middle class.

The IRGC’s security forces, the Basij and its intelligence agencies have been condemned by rights groups, foreign governments and families of dead protesters, accused of torture and unlawful killing. Economically, the IRGC’s reach is so broad that it’s targeted successful businesses for takeover.But it’s seen by others as the great defender against the US and Israel, directly fighting America’s economic and military grip on the region and the only thing that stands in the way of an invasion.

The “deep entrenchment” of the IRGC in Iran’s politics, economy and society mean it’s well positioned to “dominate the state’s emerging collective leadership and continue its gradual usurpation of state power,” said Ali Alfoneh, a senior fellow at the Arab Gulf States Institute.When a small band of Iranian revolutionaries decided to establish a “people’s army” in 1979 their ambitions were somewhat more modest. Their priority was to protect the nascent political system from a coup and prepare for what they thought was an inevitable military engagement with the US.

At that time, Mohsen Sazegara, a founding member of what would become the IRGC, never imagined that what was essentially a guerilla army would evolve into what he now refers to as an unwieldy “seven-headed serpent.” The initial plan was to have 500 officers and around 50,000 volunteers, he said.“It wasn’t supposed to be a big organization,” Sazegara, who left the Guard shortly after it was established, said in an interview. “Now it’s a monster. It’s got a finger in every part of the country.”

There are no official figures for the IRGC’s reach, but over the years academics and analysts have estimated that its business activities and assets represent anything between 20% to 40% of the Iranian economy.Sazegara reckons it has around 170,000 active personnel, including Basij paramilitaries often used to break up protests and police public behavior, as well as “a few million” people who are more informally employed by the organization and its wider business interests.

The turning point was the war with Iraq in the 1980s. While the direct war with the US that Sazegara and his cohort feared didn’t transpire, Saddam Hussein instead started a full-scale military invasion from Iran’s southwestern border.That gave immediate purpose to the fledgling IRGC at a time when Supreme Leader Ayatollah Ruhollah Khomeini was concerned about the loyalty of Iran’s regular army and the risk of a foreign-backed coup.

The conflict was used to galvanize support for the Islamic Republic and also its ability to suppress dissent. Military deaths were lionized and the conflict burnished the IRGC’s image as the defender of the revolution.In 1989, a year after the war ended, President Ayatollah Hashemi Rafsanjani sought to repair the economy with help from the IRGC and its experience building roads and bridges on the oil-rich wetlands of the Iran-Iraq border.

“They became involved in contracting work, construction projects and trade and factories,” said Sazegara, who became an opponent of the Islamic regime and was imprisoned several times until he eventually went abroad for medical treatment following a hunger strike. “It went on from there and eventually they went into high-profit work.”After the war with Iraq, Iran needed everything — dams, roads, railways, ports and all sorts of infrastructure — and yet didn’t have the resources to get things done, so the IRGC stepped in. With the country battered again by foreign aggression, Iran is now in a similar situation, according to an Iranian official, who spoke on condition of anonymity.

The most prominent example of the IRGC’s economic influence is the conglomerate Khatam al-Anbiya Construction Headquarters that was established in the aftermath of the war by then-commander Mohsen Rezaei. A key figure in Iran’s security apparatus for years, Rezaei is now on the new National Defense Council.

Khatam has been involved in some of Iran’s biggest infrastructure projects including the Persian Gulf Star refinery, some 11,000 kilometers of pipelines, petrochemical companies, housing projects, shopping malls and telecoms.It’s taken over contracts from foreign companies when they’re forced out of Iran because of international sanctions and also profited from oil sales. It did particularly well during the presidency of hardliner Mahmoud Ahmadinejad, who oversaw a period of massive public spending at a time of high oil prices. When President Donald Trump abandoned the US’s nuclear deal with Iran in 2018, a fresh cycle of sanctions triggered another exodus and Khatam announced some $28 billion of new projects for the year ahead.

The group also had some high-profile financial failures: It spent three years and more than $40 billion developing the giant South Pars gas field without producing any gas, according to the moderate government of Hassan Rouhani, which tried to curtail Khatam’s involvement in the energy sector.

Iran became increasingly isolated after the collapse of the nuclear deal and the US assassination of the IRGC’s most powerful figure at the time, General Qassem Soleimani, in January 2020. That was, within days, followed by a self-inflicted calamity when the IRGC shot down a Ukrainian International Airlines passenger plane, killing 176 people, most of them Iranian nationals.The disaster sparked protests in Tehran and angry crowds were filmed ripping down and burning commemorative posters of Soleimani.

Internally, these events served to marginalize Rouhani and the elected government. The Guard, for all the anger toward it among Iranians, exploited the situation and its hardline political allies gradually clawed back control of the state and its main institutions. Recent years have seen crackdowns on dissent and women’s rights increasing in both scope and violence.Now, the galvanizing impact of Israel’s attacks on nationalist sentiment in Iran may have already helped improve public support for the IRGC, according to Narges Bajoghli, associate professor of Middle East Studies at the School of Advanced International Studies, Johns Hopkins University.

“People are angry at them, but they also realize that there is no other force in the country,” she said. “What they’re committed to today, is about sovereign independence and the idea of resistance to Western and Israeli imperialism.”The question is where it goes from here. For Sazegara, the IRGC’s biggest threat is itself. Management of its myriad divisions and departments is centralized around Khamenei, according to Sazegara, meaning that ultimately its fate is heavily tied to that of the 86-year-old supreme leader.

What’s more, the Axis of Resistance allowed the IRGC to project power over the Middle East for almost two decades, and that pillar of its strategy no longer exists for the time being.That makes it more likely that the organization will look toward a nuclear deterrent, according to Alfoneh at the Arab Gulf States Institute. While Israel and the US hit Iran’s key nuclear facilities in June, its cache of enriched uranium hasn’t been seen since.

Indeed, it would take a US ground invasion or a sustained bombardment by both the US and Israel to change the metrics for the IRGC, Alfoneh said. “The 12-day war exposed the IRGC’s counterintelligence failures,” he said. “However, the IRGC’s loss of prestige is unlikely to lead to its capitulation.”

Source: Bloomberg Europe

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Risk Warnings and Disclaimers

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Adam

Forex

Fundamental Overview

The USD came under some pressure at the start of last week following the US CPI report as the data came mostly in line with expectations. In the following days though, we got some hottish data with the US PPI beating expectations by a big margin, the US Jobless Claims improving further and the inflation expectations in the UMich survey surprising to the upside.

Overall, we ended the week basically flat on the US dollar as the aggressive dovish expectations on the Fed got trimmed a bit. Nevertheless, given the overreaction from the Fed members to the last soft NFP, a September cut looks unavoidable now and only a hot NFP report in September might get us to a 50% probability (although it would certainly diminish expectations for rate cuts after the September one).

The focus has now switched to Fed Chair Powell’s speech at the Jackson Hole Symposium on Friday. Traders will be eager to see if he changes his stance as well. Most likely though, he won’t pre-commit to anything and just reiterate that they will decide based on the totality of the data.

On the NZD side, nothing has changed fundamentally, and we haven’t got any notable data other than the labour market report which came mostly in line with expectations and didn’t change much for the RBNZ pricing. The market still expects around 41 bps of easing by year-end with 94% probability of a cut tomorrow. Tomorrow’s cut would bring interest rates to the central bank’s estimated 3% neutral rate.

NZDUSD Technical Analysis – Daily Timeframe

NZDUSD Daily

On the daily chart, we can see that the NZDUSD pair pulled back just before hitting the major trendline around the 0.60 handle. If we get another rally, we can expect the sellers to step in around the trendline with a defined risk above it to position for a drop into the key 0.5850 support zone. The buyers, on the other hand, will look for a break above the trendline to increase the bullish bets into the 0.6050 resistance next.

NZDUSD Technical Analysis – 4 hour Timeframe

NZDUSD 4 hour

On the 4 hour chart, we can see that the price recently broke below the upward trendline that was defining the bullish momentum. This might be a signal for a deeper pullback into the 0.5850 support zone. If the price break below the recent low at 0.5906, we can expect the sellers to pile in to extend the drop into the support zone. The buyers, on the other hand, will have a much better risk to reward setup around the support zone to position for a rally into the 0.6050 resistance.

NZDUSD Technical Analysis – 1 hour Timeframe

NZDUSD 1 hour

On the 1 hour chart, we can see that we could be forming a tight range between the 0.5944 and the 0.5906 level. Given that we have the RBNZ tomorrow, these levels might not mean much. If we get a hawkish decision, we can expect the buyers to pile in on a break above the 0.5944 level to target the major trendline. Conversely, a dovish decision should trigger a downside breakout and a move into the 0.5850 support. The red line define the average daily range for today.

Upcoming Catalysts

Tomorrowwe have the RBNZ rate decision, Fed’s Waller speaking and the FOMC meeting minutes. On Thursday, we get the US Flash PMIs as well as the US Jobless Claims figures. Finally, on Friday, we conclude the week with Fed Chair Powell speech at the Jackson Hole Symposium.

Source: investinglive

Risk Warnings and Disclaimers

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Adam

Forex

Markets were fed peace talk headlines out of Washington, but the tape traded like it had already discounted the choreography. Diplomatic theatre can move sentiment, but currencies and commodities don’t run on applause — they run on probabilities. And what traders see is that the core territorial horse-trading between Ukraine and Russia hasn’t even left the paddock. Until that stall door swings open, “roadmaps” and “security guarantees” are the diplomatic equivalent of option premium — all time value, little intrinsic.

The euro wilted overnight, not dramatically, but enough to remind us that hope is not a strategy. Markets had priced a glimmer of peace; instead, they got the same ambiguous mixture of optimism and obstacles.

The street is still leaning into Fed cuts — September odds sitting at -21bp, with two fully baked in by year-end — a setup that typically gives cover to buy EUR/USD dips. But July’s PPI was the kind of print that makes even the most dovish dealer flinch. Inflation risk hasn’t been extinguished, just smothered under softer labour signals. Heading into Jackson Hole, the posture feels textbook pre-event: plenty of anticipation, little conviction. That’s why you can sense traders quietly trimming EUR/USD length, lightening the load before Powell takes the stage.

The euro could still squeeze higher this week — 1.1700 is very much in play — but for a moonshot, you’d need Powell to underwrite the move. Without him flipping the dovish switch, all you’ve got is positioning churn and tactical dip-buying. A push beyond 1.1800 demands more: softer U.S. data, Powell opening the rate-cut floodgates, and meaningful progress at the negotiating table. That cocktail hasn’t been mixed yet.

The Washington summit added structure but not resolution. Trump talked up trilateral meetings, Zelenskyy agreed to face Putin, and NATO hinted at deeper security guarantees. That’s progress — but it’s the kind of progress that fills newswires, not order books.

Territorial concessions remain the elephant in the room, and traders know those negotiations will be the hardest. Until we see even a hint of compromise there, peace optimism is more headlines than substance. The market knows how this story trades: every announcement sparks a glance at the screen, but unless maps are redrawn, the effect fades before the next candle closes.

Short-end pricing screams conviction: cuts are coming. But the long end of the Treasury curve refuses to buy the fairy tale. 30-year yields drift higher, flashing warnings about supply, sticky inflation, and fiscal credibility. The market is effectively telling you: the Fed can provide insurance cuts up front, but it can’t wish away structural deficits or fiscal overhangs.

For FX, that divergence matters. The short end weakens the dollar in the near-term, but the back end provides just enough resistance to keep the greenback from rolling over. The euro, by contrast, has to climb a wall of its own: a softening trade balance and a still-sluggish export engine. For now, it’s a race to see who blinks first — Powell with cuts, or Europe with more profound trade-driven weakness forcing the ECB’s hands.

Equities have barely flinched. Traders have seen this movie before: peace chatter makes for great headlines, but forward earnings, tariffs, and rate cuts remain the bigger swing factors. The S&P 500 wavered after record highs, not because of geopolitics, but because no one wants to be caught offside if Powell makes a hawkish surprise. Like FX players, fast money stock traders are long anticipation, short conviction — waiting for Friday’s speech like gamblers eyeing a roulette wheel. Still, these are minor adjustments in the broader scheme of things.

Bonds have been calm, too, though the elephant in the room remains supply indigestion. With issuance heavy and investors already loaded, spreads feel tight for a reason. The peace narrative may matter in theory, but for bond desks, funding dynamics and Fed policy matter far more.

Crude showed more sensitivity. Brent slid toward $65, WTI near $63, the dip reflecting a market gaming out a ceasefire scenario where Russian barrels come back online just as OPEC+ ramps up production. Oversupply risk is back on the radar.

But the geopolitical premium hasn’t vanished. Ukraine’s latest pipeline strike reminded traders that infrastructure remains a target. Sanctions are another wild card — Trump slapped India while letting China skate, proving that energy diplomacy is as selective as it is strategic. For oil bears , every handshake comes with a shadow of sabotage.

Gold is trading steady near $3,340-40/oz, flat but tense. The metal has already had its glory run — up 27% YTD, ETFs stuffed, central banks still buying. But positioning feels more like a coiled spring than exhaustion. If Powell blinks dovish at Jackson Hole, gold won’t hesitate to make another run. Until then, it’s the classic trader’s hedge: a quiet insurance policy against both Fed error and geopolitical backsliding.

The Washington summit was a step forward, but markets are disciplined beasts — they don’t run on political hope, they run on odds and outcomes. The hard negotiations are still ahead, and without them, traders default back to the one driver that actually moves the tape: the Fed.

The setup into Jackson Hole is textbook: short-end screaming for cuts, long-end resisting, dollar still king but wobbling at the edges. EUR/USD is the hinge in this story — offered on peace noise, but still with scope to squeeze higher if Powell delivers. Oil is the barometer for peace optimism, gold the insurance policy, equities the tightrope walker waiting for the croupier to roll the dice.

The curtain rises in Wyoming later this week. The peace roadmap may set the backdrop, but the Fed’s script will decide the play.

Source: investing

Risk Warnings and Disclaimers

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Olivia Brooks

Cryptocurrency

As Bitcoin plunges to a daily low of $114,000, a loss of $3,000 within 24 hours has left investors deeply worried. Continuous tests around the $112,000 mark heighten these concerns. Our weekly report underscored expectations of a horizontal and downward trend in Bitcoin’s value, explaining the underlying reasons. This aligns perfectly with recent market movements, clarifying why cryptocurrencies are experiencing a downturn.

Why are Cryptocurrencies Declining?

Recent U.S. producer inflation figures released five days ago surpassed expectations, showing a rise of 3.3% against the anticipated 2.5%. Combined with a cooling labor market, these numbers paint a bleak picture. The Federal Reserve is in a bind: while a rate cut might support employment, it risks accelerating inflation. Recent PPI data reflects concerns over tariffs driving inflation upwards. The troubling aspect is the new effective tariff rates enforced in August, increasing for almost all countries.

The base tariff, previously at 10%, has surged to a minimum of 15% for many countries. Consequently, the impact of tariffs is expected to be more pronounced this month, likely leading to September’s figures also exceeding estimates. As the Federal Reserve anticipates August data, crypto investors are already feeling the heat, fearing the consequences.

Moreover, this week brings crucial developments that could further unsettle the crypto space. The Jackson Hole meeting is happening, followed by the release of Fed minutes tomorrow evening and a speech by Powell on Friday. These consecutive events are set to significantly impact cryptocurrencies, further dampening risk appetite.

Investors’ anxiety is compounded by these successive challenges, casting uncertainties over market stability. The anticipation of pivotal economic data and Federal Reserve decisions looms large, contributing to the prevailing negative sentiment among crypto enthusiasts.

Furthermore, the potential for heightened tariffs in the coming months adds an additional layer of complexity to the volatile crypto market. Stakeholders find themselves navigating through increasingly unstable financial tides.

As the global economic landscape responds to these shifts, the repercussions on the cryptocurrency domain could be profound. Close monitoring of these economic indicators is essential for stakeholders aiming to refine their investment strategies amidst heightened market volatility.

In the face of these challenges, the cryptocurrency market remains on edge, poised for potential fluctuations influenced by broader economic pressures and policy-related developments. The path ahead is fraught with challenges, urging careful attention and strategic navigation.

Source: CryptoSlate

Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Key takeaways:

Short-term Bitcoin holders have sold over 20,000 BTC at a loss since Sunday.

Technicals suggest pushing Bitcoin’s price below $100,000 could be a tough task for the bears.

Bitcoin price has pulled back below $116,000, as uncertainty ahead of Jerome Powell’s Jackson Hole speech led investors and traders to reevaluate risks and stay cautious.

Bitcoin “weak hands” back to realizing losses

Bitcoin has retraced 7.6% from its new all-time high of $124,500 set last week. Following this price action, onchain data from CryptoQuant showed that over 20,000 BTC held by short-term holders (STHs) — investors who have held the asset for less than 155 days — have moved to exchanges at a loss over the last three days. Will Bitcoin Price Fall to $110K? Short-Term Holders Sell 22K BTC at a Loss_1

Will Bitcoin Price Fall to $110K? Short-Term Holders Sell 22K BTC at a Loss_1

BTC short-term holder losses to exchanges in 24 Hours. Source: CryptoQuant

More than 1,670 BTC were transferred to exchanges at a loss on Sunday, which surged to 23,520 BTC by Tuesday, coinciding with a 3.5% drop in BTC’s price to $114,400 from $118,600, per Glassnode data.

The chart below shows that most Bitcoin sent to exchanges at a loss are from STHs, while LTHs — both in profit and loss — comprise just 10% of the total volume to exchanges. Will Bitcoin Price Fall to $110K? Short-Term Holders Sell 22K BTC at a Loss_2

Will Bitcoin Price Fall to $110K? Short-Term Holders Sell 22K BTC at a Loss_2

BTC: Transfer volume by LTH/STH in profit/loss to exchanges. Source: Glassnode

This activity underscores a familiar behavioral pattern where short-term speculators panic-sell during market dips, frequently realizing losses.

The last time Bitcoin STHs moved into sustained loss realization was in January, “a period that marked the deepest correction of this cycle,” according to CryptoQuant analyst Kripto Mevsimi.

“For the first time since that January drawdown, STH-SOPR multiples have slipped back below 1, indicating that short-term investors are once again realizing losses,” the analyst said in an Aug. 18 Quicktake note.

Historically, this has carried two implications: A weakening momentum where extended loss realization often precedes deeper corrective phases, or a healthy reset where “brief dips below 1 can flush out weak hands, clearing the path for more sustainable rallies,” Kripto Mevsimi said, adding:

“This loss-selling event becomes a critical barometer of market health. If absorbed quickly, it could mirror past resets that fueled strong rebounds. If not, it risks signaling a momentum breakdown.”Bitcoin STH SOPR Multiples 30DMA/365DMA. Source: CryptoQuant

Bitcoin’s drop below $100,000 “tough fight for bears”

BTC’s latest drop below $115,000 has several traders and analysts calling for deeper price corrections to sub-$100,000 levels.

For this to happen, “$BTC would need to break the $100K–$110K wall” built for over 100 days since breaking above the $100,000 mark on May 8, trading firm Swissblock said in an X post on Monday, adding: Will Bitcoin Price Fall to $110K? Short-Term Holders Sell 22K BTC at a Loss_4

Will Bitcoin Price Fall to $110K? Short-Term Holders Sell 22K BTC at a Loss_4

”BTC/USD daily chart. Source: Swissblock

For Bitcoin analyst AlphaBTC, a close below Monday’s low at $114,700 could see the price drop toward the $110,000-$112,000 demand zone. Will Bitcoin Price Fall to $110K? Short-Term Holders Sell 22K BTC at a Loss_5

Will Bitcoin Price Fall to $110K? Short-Term Holders Sell 22K BTC at a Loss_5

Source: AlphaBTC

Meanwhile, prediction market platform Polymarket expects more price weakness for the rest of the week. The most likely outcome for BTC is now $114,000 at 73%, while a close below $112,000 is at 39% probability, and 18% and 16% odds for a drop toward $110,000 and $108,000, respectively.

As Cointelegraph reported, Bitcoin could continue consolidating in the current range as many BTC investors may continue taking profit below all-time highs.

Source: Cointelegraph

Risk Warnings and Disclaimers

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Damon

Russia-Ukraine Conflict

President Trump has made it clear that he will not send American troops to enforce a possible peace agreement in Ukraine centered on 'security guarantees' - despite having appeared possibly open to the idea just a day earlier.

In a phone interview on Fox News Tuesday morning, Trump was asked what assurances he could offer that American forces wouldn't end up defending Ukraine's borders, and beyond his time in office. The question was based on his campaign and opening months in office - when he repeatedly vowed no more boots on the ground in entangling conflicts abroad.

"You have my assurance, and I’m president," Trump responded. European leaders are pressing for the strongest possible security guarantees for Ukraine, to ensure it can never be attacked in the future, once a peace settlement is reached.

A White House official additionally confirmed on Tuesday that Trump has definitively ruled out deploying US ground forces to Ukraine, according to CNN.

Security guarantees for Ukraine were a central focus between Trump, Ukrainian President Volodymyr Zelensky, and seven EU leaders - among them NATO Secretary General Mark Rutte.

The Europeans want clarity on what level of American military support Trump is willing to offer to prevent Russia from regrouping and pursuing further territorial advances after a potential peace deal.

British Prime Minister Keir Starmer, who was in the White House yesterday alongside France's Macron, is still vowing to press for the most robust guarantees possible.

"Turning to next steps, the Prime Minister outlined that Coalition of the Willing planning teams would meet with their US counterparts in the coming days to further strengthen plans to deliver robust security guarantees and prepare for the deployment of a reassurance force if the hostilities ended," a Downing Street spokesperson said in a statement.

"The leaders also discussed how further pressure – including through sanctions – could be placed on Putin until he showed he was ready to take serious action to end his illegal invasion," Starmer's office added. In some ways, this can easily be read as the Europeans saying they are actively trying to sabotage peace, as the fear is that it will be settled on Moscow's terms.

Additionally, Bloomberg is reporting that "Security guarantees for Ukraine will be formalized in the coming days and as soon as this week, European Council President Antonio Costa tells reporters in Lisbon following virtual meetings of 'Coalition of the Willing' and EU leaders.

President Putin has repeatedly emphasized that Russia will never allow Western boots on the ground in Ukraine as part of some peacekeeping force or entity patrolling frozen front lines. At least Trump is saying he's on the same page, and fully understands this, at least for now.