Crypto Market Loses 1.7%; Bitcoin Slumps Further
Ethereum fails to test its first resistance level, major altcoins record decline
Crypto Market Loses 1.7%; Bitcoin Slumps Further
The global crypto market flashed red on Thursday amidst Bitcoin’s (BTC) muted liveliness, losing 1.7 per cent to close at $1.32T as of 9 am IST. The overall market seemed to be in a dormant state, though with a modest increase of 3.3 per cent in its trade volume.
The current slump in BTC prices is attributed to the weak holding patterns prevalent in the market and the record-high inflation in the US. BTC registered a decline of 2.3 per cent to close at $31,950. Earlier, it steadily lost its ground and hovered close to the first support level at $30,900. BTC market trade volume saw an increase of 7 per cent, signalling receding selling pressures from the whales. The current pattern of BTC pricing points to a bearish rectangle, with a possible further downtrend. BTC may soon be testing its significant support level of $30,350. BTC failed to test any resistance levels today.
Ethereum (ETH), the second-largest cryptocurrency by market cap, has failed to test its first resistance level at $2,014 and closed the day at $1,950. If the downturn persists, ETH might go a leg lower to trigger the $1,800 support levels.
Major altcoins, except Binance Coin (BNB) and Stellar (XLM), registered a 2 to 7 per cent decline over the day. BNB and XLM tokens grew by 4 and 5 per cent, respectively.
BTC continued to dominate the market cap with a 45.5 per cent share. The silver lining for BTC lies in miners' return accompanied by on-chain metrics denoting 29 per cent of reclaimed hash power. This development might help BTC to gain momentum in the coming days. BTC continuing to remain resilient above the critical $30,000 levels is key for broader market recovery.
Top Gainers today:
NEM (XEM): 20.3% BakeryToken (BAKE): 13.1% Kusama (KSM): 8.7%
Top Losers today:
Telcoin (TEL): -14.8% THORChain (RUNE): -12.8% Decentraland (MANA): -10.4%
The analysis includes the top 100 coins only as of 9am IST
Source: CoinMarketCap
Crypto News at a Glance:
Paypal, in a bid to make the process of buying cryptocurrencies more flexible, announced that its users will now be able to purchase upto $100,000 worth of crypto assets every week, a five-fold increase in limits. Mobile payments company Square, founded by Jack Dorsey, announced that it will be launching a platform for developers to create non-custodial, permissionless, and decentralized financial services using Bitcoin. France called for an EU-wide cryptocurrency regulation that would lend greater power and direct control to Paris-based European Securities and Markets Authority (ESMA) to regulate the growing crypto market in the region. According to Google Trends, a tool to gauge interest on general topics, the number of searches related to Bitcoin around the world is at a seven-month low. This marks a significant decline from the peak reached in May this year.
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BTC Volatility Reaches One-Year Low on Top of Negative Funding Rates and Premium
There has been negative sentiment in the cryptocurrency market for several months. Bears have dominated Bitcoin’s price action since at least the May 19 crash. Since then, however, the BTC price has been consolidating, and weakening volatility has provided a blue bottoming signal.
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The recent visit of the Puell Multiple indicator to oversold territory coupled with negative funding rates in the futures markets and a negative premium on GBTC provides interesting data for interpretation. These indicators point to an upcoming big move in Bitcoin’s price. The question remains: will it be up or down?
Negative funding rates and premium
Since the monumental crash of 19 May 2021, when Bitcoin’s price bottomed at $30,000, funding rates on most cryptocurrency exchanges have turned negative. This means that traders in the futures markets must pay a premium to maintain their short positions throughout the ongoing May-July 2021 BTC consolidation period (red rectangle).
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This situation means that most investors are expecting declines and market sentiment is bearish. On the other hand, it is also a hidden bullish signal, as it turns out to be more profitable to take a long position and gives exchanges and whales the opportunity to set a bear trap.
We see a similar situation on the premium indicator for the Grayscale Bitcoin Trust (GBTC). Premium is the difference in the valuation of an asset in a given fund and the market price.
From the beginning of GBTC, the premium remained positive and investors were willing to pay more for an asset purchased through the fund as they believed it would increase over time.
However, since the beginning of March 2021, we see the opposite development. Premium has fallen below the 0% line (black) and has remained negative for 5 months (red rectangle).
Bullish signals?
However, despite the negative funding rates and premium on GBTC, some analysts see bullish signals here. In today’s tweet, long-term investor and analyst @CryptoCapo said that the continuation of negative values of these indicators during Bitcoin’s current price range is another reason for bullish expectations.
Moreover, the analyst linked these indicators to the bullish reading provided by Puell Multiple. As recently reported by BeInCrypto, this indicator touched the oversold area (green), where it has been only a few times during the entire history of Bitcoin prices.
BTC volatility turns blue
The cryptocurrency asset class is characterized – by its nature and young age – by a high volatility. Nevertheless, also in this market, from time to time we see periods of very low volatility that result in relative price stability.
One of the best indicators of Bitcoin’s volatility is the BBWP (Bollinger Band Width Percentile), which measures the percentage of Bollinger bands moving away. The last time this indicator turned blue and signaled minimal volatility, Bitcoin was in the $8800 – $9800 range for over a month, in June-July 2020 (green rectangle).
Today, with the BTC price in the $30,000 – $34,000 range, volatility is once again bottoming out. This potentially suggests that a sharp move in the largest cryptocurrency is imminent. However, the direction of this movement is not determined by the volatility indicator itself.
Conclusion
Negative funding rates and premium indicate a generally bearish sentiment in the cryptocurrency market. However, historical data shows that these were the best opportunities to buy Bitcoin at a discounted price. Sentiment can change overnight.
The recent visit to the oversold area of the Puell Multiple indicator and the upcoming big move in BTC volatility could be signals of a reached or impending long-term bottom in the crypto market.
Bitcoin price at risk of $30K retest following bearish triangle breakdown
Bitcoin’s (BTC) price looks poised to retest $30,000 as traders continued to pull back from upside bets on a spell of a bearish technical pattern.
Dubbed as a Symmetrical Triangle, the structure forms when an asset fluctuates between two converging trendlines.
In doing so, the asset rebounds after testing the Triangle’s lower trendline as support and pulls back upon treating the upper trendline as resistance. Eventually, it breaks out of the range, in the direction of its previous trend, and falls by as much as the maximum distance between Triangle’s upper and lower trendline.
Why $30,000?
Bitcoin was trending inside a similar Triangle-like consolidation pattern until it ultimately broke below the structure’s lower trendline. As a result, the flagship cryptocurrency’s probability of shifting its downside target near $30,000 increased. That is partly because the structure’s maximum height was shy of $2,550, and subtracting it from the point of breakout (~$33,878) lands the price objective near $31,308.
Bitcoin formed a sequence of bearish and bullish reversal structures as it consolidated between the $30,000–$40,000 price range. Source: TradingView
The bearish setup also surfaced as Bitcoin tested $32,334 as its interim support in Thursday’s early London session. A minor bounce ensued that took the price above $32,600. However, the rebound lacked additional upside conviction owing to a bearish divergence between prices and volumes, suggesting that Bitcoin might resume its trend to the downside.
Peter Brandt, chief executive of Factor LLC — a global trading firm — also suggested a decline toward $30,000, albeit using a different indicator. The veteran trader spotted BTC/USD exchange rates inside a rectangular pattern, a price block that has lately been keeping Bitcoin in a medium-term bias conflict.
Bitcoin stuck inside a rectangle. Source: Twitter/Peter Brandt
The price traded midway through the rectangle upon pulling back from its upper trendline resistance. Such a move typically prompts the spot BTC/USD rate to fall toward the lowest rectangle support level, which coincided with $30,000.
Fundamentals
Unsupportive macroeconomic fundamentals, in part, fueled the latest Bitcoin price drop.
The primary among them was the minutes from the Federal Reserve’s gathering that came out Wednesday around 14:30 EST. As expected, the United States central bank officials suggested that they might end up pulling back their support of the economy sooner than they had expected.
“Various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated at previous meetings in light of incoming data,” the minutes read.
The Federal Reserve’s new dot plot expects rate hikes in 2023. Source: Bloomberg
Bitcoin tends to benefit from loose monetary policies.
The cryptocurrency surged from as low as $3,858 in March 2020 to as high as $65,000 in mid-April 2021 as the Fed slashed its benchmark lending rates to near zero, thus affecting the U.S. dollar’s purchasing power, and started buying government bonds and mortgage-backed securities at the rate of $120 billion per month, pushing down yields.
For clarity, central banks’ asset purchase programs cause inflationary pressures, for they expect to monetize a part of the government’s deficit spending. Such purchases tend to inflate prices of equities and fixed-income investments. Coupled with cheaper lending, the loose monetary programs increase fiat liquidity in the system, boosting Bitcoin’s “superior store of value” narrative against an unlimited dollar supply.
As a result, investors started shifting to riskier safe-haven assets, including Bitcoin, to seek better returns. But as soon as the fears of the Fed’s tapering grew over markets, Bitcoin started declining. On Wednesday, Bitcoin’s move lower from above $35,000 came right after the central bank’s minutes went public.
Bitcoin reacts negatively to the Fed’s June minutes. Source: TradingView
John Miller, a financial analyst associated with Seeking Alpha, noted that the Fed’s hawkish notions offset chairman Jerome Powell’s aim to ensure strong long-term monetary accommodation. In the latest minutes as well, Powell called the U.S. economic recovery weak, citing weak job growth in June.
“The Fed’s accommodative balance sheet policy will continue to support elevated liquidity in the banking system and backstop asset prices,” Miller wrote.
“Cryptocurrencies and crypto assets with strong store of value dynamics, such as Bitcoin, will excel in this environment.”
Alexey Veledinskii, product owner at cryptocurrency spot and derivatives exchange Digitex, anticipated Bitcoin to hold $30,000 on persistent inflation concerns. He said:
“Major support at $30,000 can easily be flipped with a rebound to more ambitious price points toward $50,000 to $70,000 in the mid to longer-term.”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.