Bitcoin's Bullish Momentum Fades Amidst Decreased Liquidity and Market Challenges
Summary:
Bitcoin's bullish momentum has faded, resulting in an 11.4% loss in the past month. Analysts compare the current market to the pre-bull market cycle of 2015-2017. Factors impacting Bitcoin's price include decreased liquidity, reduced interest from bulls, and a downturn in investor sentiment. Short-term uncertainty remains, but institutional investors remain optimistic. Regulatory actions, interest rate hikes, and macroeconomic events continue to affect Bitcoin's price. Despite challenges, market participants expect a recovery in the long term.
Bitcoin's bullish momentum, which had led to a significant year-to-date gain of 55.7%, has now vanished as the cryptocurrency suffered an 11.4% loss in the past 30 days. Despite initial optimism after the Grayscale court victory against the SEC, the September losing streak has erased all gains. Analysts are drawing parallels between the current market situation and the pre-bull cycle of 2015-2017.
One of the factors impacting Bitcoin's price is the disappearance of liquidity, as investor sentiment stalls. Traders with short positions have been dominating liquidations in the futures market since the beginning of 2023. On August 17, a flash crash caused over $213.5 million worth of longs to be liquidated, marking the largest single-day liquidation since May 2022. Since then, there has been a constant outflow of capital from risk assets like Bitcoin and Ethereum.
Moreover, both Ether and Bitcoin derivatives volumes have seen a decrease, indicating reduced interest from bulls. Some analysts believe that Bitcoin's price might drop further to $22,000. Currently, over $8.76 million worth of longs were liquidated in a 24-hour period, and open options are skewed towards the short side, suggesting that bears are in control.
When BTC longs are liquidated without sufficient buying pressure, it has a negative impact on Bitcoin's price. The trading volume for Bitcoin has also reached its lowest levels since early 2021, with BTC Ordinals volume down by over 98%. These factors have contributed to a downturn in investor sentiment, as reflected by the Fear and Greed Index, which has shifted from neutral to fear in the past 30 days.
Despite the short-term uncertainty, institutional investors remain optimistic about the long-term prospects of Bitcoin. Several top investment firms currently have ETF applications pending with the SEC, indicating their interest in Bitcoin financial instruments. However, the SEC seems inclined to continue delaying decisions on approving Bitcoin ETFs, potentially further impacting investor sentiment and market prices. Bitwise has already withdrawn their ETF applications, and it seems BlackRock's application will be delayed until 2024.
Amidst the current downturn, Pantera Capital believes that Bitcoin could reach $148,000 by July 2025. However, Bitcoin's price continues to be influenced by macroeconomic events and regulatory actions, as well as potential interest rate hikes. Despite recent developments such as China recognizing virtual assets as legal property and an upcoming VASP license for the OKX exchange, Bitcoin's price has continued to decline. Federal Reserve Chairman Jerome Powell's speech in Jackson Hole, indicating the continuation of aggressive interest rate policies, further adds to the uncertainty.
Nevertheless, market participants still anticipate a recovery in Bitcoin's price, especially as more financial institutions appear to be embracing the cryptocurrency. As always, it's crucial to conduct thorough research and be aware of the risks involved in investment and trading decisions.
Published At
9/5/2023 6:59:05 PM
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