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Three Reasons Why Bitcoin's Ascendancy Might Stagnate

Bitcoin has increased by 70% in the last four weeks, surpassing $50,000 for the first time in three months. While the climb seems to have rekindled the wider optimistic sentiment, blockchain analytics and chart considerations suggest that additional advances toward record highs may be sluggish to arrive.

Increased inflows of foreign currency

The amount of bitcoins stored in exchange wallets is increasing, bucking a previous pattern of outflows and indicating increased investor selling intentions.

Crypto exchanges got 16,606.80 BTC on Monday, according to Glassnode data, the biggest daily net inflow in almost a month. Over 29,000 BTC have been transferred to exchanges in the last week. William Clemente, principal insights analyst at Blockware Solutions, tweeted, "[It's] not a trend we want to see continue."

When investors intend to sell their coins, they usually transfer them from their wallets to exchanges. If demand-side forces stay constant, the rise in the currency balance may put a temporary halt to the price surge.

In the three weeks leading up to Aug. 19, the exchange balance fell by more over 100,000 BTC, indicating a generally positive market mood. During that time, Bitcoin hit a low of about $30,000 and then rose to $45,000.

The buildup of whales has come to a stop.

Whales, or big investors with the capacity to create or break market movements, who bought bitcoin following the price collapse in mid-May have started selling them.

Over the last three weeks, the supply owned by entities with a balance of 1,000 BTC to 10,000 BTC has decreased by almost 75,000 BTC, deviating from the increasing price.

Entities are groups of addresses that a single network member owns. Following bitcoin's drop below $30,000 in mid-May, which signaled a price bottom, these big investors started acquiring coins. In the weeks that followed, Bitcoin hung on to the support and bounced this month.

The current price movement reflects a weakness on the purchase side as well. QCP Capital stated in its Telegram channel that “the inability to finish the day over $50,000 indicates some weakening in demand.” On Monday, Bitcoin reached a high of $50,496 but ended the day (UTC) below $50,000. At the time of publication, the cryptocurrency was trading for about $49,400.

According to QCP Capital, exponential upside breakouts like those seen at the end of 2020 are unlikely. The company also cited the Grayscale Bitcoin Trust discount and the continuing tranquility in implied volatility, or investors' expectations for price turmoil, as factors for the positive outlook's reduction.

Even though bitcoin climbed over $50,000 on Monday, the annualized one-month implied volatility is staying around the previous low of 82 percent. Meanwhile, according to Skew statistics, GBTC shares traded at a 14 percent discount to net asset value on Monday. “GBTC should at least trade at par as a proxy for US interest if we are to anticipate any significant follow-through in spot,” QCP Capital said.

The company said, "The obvious strategy for us here is short vols [sell call/put options] as we anticipate the spot to remain sticky around the $48,000-$51,000 area."

Draw out a list of obstacles.

According to technical analysis, the cryptocurrency may stabilize before reaching $51,110, which is the 61.8 percent Fibonacci retracement of the mid-April to July sell-off.

The 14-day relative strength index (RSI) has become inactive, with no apparent directional bias. “Despite the bullish price movement, a consolidation triangle in the RSI also indicates market hesitancy,” QCP Capital stated.

According to Fairlead Strategies' weekly research report released on Monday, the DeMARK indicators are indicating short-term upside fatigue. Overbought circumstances are also being signaled by the weekly stochastic indicator.

In the weekly research report, Katie Stockton, founder and managing partner of Fairlead Strategies, stated, “Bitcoin is running into resistance around a 61.8 percent Fibonacci retracement level near $51,000, which would be a logical location for a short-term halt in the rally.”

Stockton, on the other hand, said that long-term momentum has improved, with the 200-day moving average (MA) rising once again. As a result, the cryptocurrency would ultimately break over $51,110 barrier.

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