empty
 
 
01.07.2022 02:18 PM
Bitcoin investors increase investment potential

Bitcoin has posted its worst financial quarter in 10 years. The price hit a new swing low of $17,700 and continues to be under pressure from sellers. Market sentiment remains pessimistic, although a significant part of the market players has adapted to the new conditions and are preparing to resume investment activity. The relative stability of Bitcoin this week contributes to this. The Fed Chairman's speech once again confirmed Bitcoin's stability, which may indicate that the phase of the most powerful bearish market is over.

This image is no longer relevant

Technical indicators confirm the market is stabilizing. Key indicators have reached the bottom of the Bitcoin market. The profitability level of BTC dropped to 50% and realized losses reached a record. At the same time, the price interacts with the 200-week MA, which indicates the fundamental importance of this metric and a certain dependence of the price on it. This was confirmed after the level of $18,000 was protected during the decline on the night of June 30. In addition, there is a regular outflow of BTC from cryptocurrency exchanges, which is also an important signal for the stabilization of the market.

This image is no longer relevant

Investors understand this and are preparing to resume investments in Bitcoin. This is evidenced by the significant volumes of stablecoins that are held on cryptocurrency exchanges. Since the start of the bear market, market capitalization has fallen by 70%, while the volume of stablecoins has fallen by only 11%. This indicates investor faith in the cryptocurrency market and a willingness to start buying the asset near the bottom.

This image is no longer relevant

This image is no longer relevant

Another important factor that contributed to volatility in the Bitcoin market was the substantial amount of leverage. As of July 1, the level of volatility had decreased significantly thanks to several massive liquidations that exceeded $1.5 billion in aggregate volume. This indicates that the market got rid of the most active traders using significant amounts of borrowed funds. As a result, the market has stabilized, and Bitcoin is sometimes jokingly referred to as a stablecoin.

This image is no longer relevant

As of July 1, we do not see the beginning of an active buyback reflected in the Bitcoin price. We can assume that the market does not believe in the current bottom at $17,700. We also do not see significant purchases from the major companies. MicroStrategy and El Salvador bought Bitcoin at current prices, but these amounts cannot be called determinative in the context of the whole market movement. Taking this into account, we can assume two scenarios.

This image is no longer relevant

The first one suggests that buyers let the price fall below $17,700, which provokes another liquidity shortage. The main victims are miners and mining pools, which begin to sell BTC to cover current expenses. Subsequently, Bitcoin drops below $15,000 and forms a local bottom, which investors start to buy back with the help of stablecoin volumes.

This image is no longer relevant

The second scenario seems to be more real because we have already seen certain prerequisites. It lies in the fact that whales play with market expectations and raise the price, provoking premature investment activity. The price falls and big BTC owners get additional liquidity at a discounted price. This scenario seems more probable because we saw for the first time since June 18 a serious activity from buyers and a defense of $18,000.

This image is no longer relevant

In any case, optimism and volumes of stablecoins grow in the market, which means that investors have finally adapted to the new reality. At the current stage, there is no active investment activity, because the market is not confident in the formation of a local bottom, and therefore we should expect an outbreak of volatility in an attempt to test the current low. We may assume that the market has passed the bottom of fear but has not reached the low.

Artem Petrenko,
Analytical expert of InstaForex
© 2007-2024
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $8000 more!
    In March we raffle $8000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

Can't speak right now?
Ask your question in the chat.
Widget callback