Bitcoin Has Dropped In Half From All-time Highs In Less Than Two Months. Now Needs A New Major Catalyst For The Resumption Of Growth And The Cancellation Occurred In The Plots Of Short-term Negative Factors, Say Analysts Delphi Digital.
As Noted By Delphi Digital Co-founder Kevin Kelly, The Decline Was Largely Driven By A Large Cut In Margin Positions And Profit-taking After One Of The Best Milestones In Cryptocurrency History. When All Traders Are In Margin Long Positions, It Is Only A Matter Of Time Before A Major Correction Is Made.
Bitcoin Found Strong Support Around $ 30,000, However A Huge Head And Shoulders Chart Pattern Promises Further Declines In The Short Term If Btc Returns To $ 30,000. Technical Analysis Suggests That Bitcoin Could Drop Well Below $ 20,000 If It Breaks That Support.
However, Technical Analysis Is Only One Element Of The Broader Picture. While These Declines Are Normal, Just Because Bitcoin Has Dropped 50% Does Not Mean That It Will Not Continue To Fall Further. There Were Many Cases When The Cryptocurrency Recovered From A Decline Of 40% Or More, After Which It Began To Fall Again, As Happened, For Example, In December 2019.
As The Rate Of Growth Accelerated, The Share Of Holders Of Short-term Profitable Positions Also Increased. Exceeding 30% Of This Value Usually Portends A Short-term High. However, The Exact Maximum Is Often Impossible To Predict, As Happened From Mid To Late 2017.
Despite The Recent Decline, 85% Of Bitcoins In Holders’ Wallets Remain Profitable Relative To The Value Of Crediting. Historically, Lows Of This Kind Were Found When The Metric Reached Values of At Least About 55%.
As Bitcoin Approaches The Maximum, There Is Often An Increase In The Sales Of Long-term Investors, Expressed In The Size Of Their Positions Relative To The Total Turnover. However, The Re-accumulation Of Cryptocurrency By Such Holders Does Not Mean That The Price Will Go Up Immediately.
In This Case, The Trend Has Already Begun To Reverse. The Share Of Long-term Coin Holders Reached A Minimum Of About 58.5% And Now Exceeds 61% Again. This Is A Good Sign For The Long Term.
Sentiment Around Bitcoin Has Also Turned Negative Over The Past Weeks. The Fear And Greed Index Is At Its Lowest Since The March 2020 Crash. Of Course, Market Conditions Were Completely Different Then, But This Fact Deserves Attention.
In Addition, The 50-day Moving Average Is Preparing To Cross The 200-day For The First Time Since March 2020. Historically, Such Bearish Crossovers Almost Always Foreshadowed Another Phase Of Decline, Which Suggests That This Is Not Yet A Minimum.
One Of The Main Macroeconomic Negative Factors For Bitcoin Is The Slowdown In Asset Purchases By Central Banks. Historically, Bitcoin Has Tended To Peak Alongside Central Bank Asset Volumes. Kelly Notes That This Is One Of His Favourite Charts At The Moment.
We Have Good Reason To Believe That The Trend Towards Large-scale Debt Monetization And Asset Purchases Is Likely To Continue. But Any Rhetoric About Tightening Monetary Policy In The Light Of Rising Inflation May Become An Obstacle For Btc In The Near Future, ”he Adds.
Notably, Inflation Expectations Peaked In Mid-may, At About The Same Time As Bitcoin’s Trend Reversal. This Is An Important Factor As The Markets Are Trading On Changes In Expectations And Not In Line With Past Trends.
One way or another, despite the recent decline, Bitcoin clearly remains in a long-term uptrend. A test of previous support around $ 20,000 would be a cause for concern.
Bitcoin Needs A Major New Catalyst To Regain Momentum. We Hold Extremely Bullish Expectations For Bitcoin’s Long-term Outlook, But For The Foreseeable Future, The Market May Face Another Stage Of Pain Before It Returns To Previous Highs, ”concludes Kelly.