Bitcoin (BTC) Recovers $37,000 on Mixed Signals
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Bitcoin (BTC) is going through a sideways price action, while sending out confusing signals on its potential direction. BTC traded at $36,852.88 mid-week, after setting a trend of sinking prices during the weekend.
The price showed some strength after expanding above $37,300. In the past weeks, BTC revisited the $40,000 range but slid back on selling, raising questions on whether the price was overdue for a dip or another upward move.
With cryptocurrency trading volumes down to $32B in 24 hours, about a third of peak activity, BTC prices are entering a stage of reassessment. The pressure on market prices may come from recent purchases that happened close to peak prices, while expecting BTC to continue its climb to $100,000. BTC price moves remain unpredictable, with sudden spikes by hundreds of USD in value within minutes.
The recent shakedown put BTC back in the $35,000 range, testing the portfolios of new buyers. Even some corporate purchases may be underwater. Currently, there are signs for newly acquired coins being sold back on the market. Yet some of the buyers have acquired coins at peak value, while sitting through the biggest BTC capitulation event in the history of trading.
There is no clear way to predict when the selling pressure would be lowered. There are still indications that coins have been taken off the market and that scarcity would continue. The BTC volatility index is still above 6% on average in the past month, above its baseline average levels around 3%.
Based on Glassnode statistics, about a third of BTC held is in the hands of short-term holders with unrealized loss. The bulk of coins is still in the hands of long-term holders that are in the money. Yet the panic may test the hands of recent retail buyers, which have faced their first 40% price drop.
The most pessimistic predictions envision BTC not done with shedding its price positions, with the possibility for a dip to $25,000.
Which BTC Models Remain Valid
One of the biggest sources of bullish attitudes is the stock-to-flow model (S2F). The model, based on diminishing supply, is a longer-term map for BTC behavior. Now, the big question is whether BTC is still capable of a price move that will break away from the model in a significant way.
The model is not breaking down, but the current prices are close to its lower range. The predictions are still unclear, suggesting two possible scenarios – either more price shedding, or a buying opportunity.
A similar model, the rainbow value-based model, is currently in the “hodl” range, suggesting it may be feasible to wait out the turbulence. The model does not guarantee additional dips, but just suggest which prices may be a good entry point.
At the same time, the Bitcoin fear and greed index improved somewhat, to 23 points. The index went up from a low of 11 points during the selling spree at the end of May. More sentiment data is required to gauge the new direction of the market. Some of the predictions for new highs by the year-end remain intact, as crypto markets may shift gears in a matter of months even after significant capitulation events.
The most recent price moves are happening after a significant shedding of leveraged positions. Now, open interest for derivatives remains low, and the market relies on spot activity to set prices.
A return to leveraged trading may shift the current BTC price range.
Can Stablecoins Save BTC
The recent price dip was followed by a new increase of Tether (USDT) holders. Starting from May 31, the USDT in top addresses increased across the board, showing a spread of tokens from the treasury and onto cryptocurrency exchanges.
At the same time, the velocity of USDT trading has fallen to 127%, meaning the higher supply of coins did not translate into more active trading. During peak market hype, USDT has reached a turnover of over 1,000%.
The USDT injected into the market is still waiting in the sidelines, spread across nine different blockchains and participating in both centralized and decentralized trading. The additional effect of BUSD Binance trading may drive upward moves once sentiment improves.
BTC Social Media Hype Subdues
In the past, BTC was the most often mentioned digital asset when it came to mainstream adoption. However, the high per-unit price and the recent stagnation have shifted the attitudes.
Surprisingly, Dogecoin took over social media, signalling that cryptocurrency hype has not disappeared.
At the same time, altcoin markets continue to recover, especially for DeFi-related assets, showing that the slow BTC price action may be due to a shift in investment attitudes.
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