(Kitco News) – Bitcoin (BTC) bulls looked to regain their footing in early trading on Monday following last week’s cascading sell-off that saw the top crypto hit a low of $53,520 in the early hours of Friday.
BTC/USD Chart by TradingView
King Crypto ended the week at approximately $55,850, “marking an 11% decrease from the previous week's closing price of around $62,775,” said Matteo Greco, Research Analyst at Fineqia International. “Throughout the week, strong selling pressure was evident, with BTC trading as low as $53,500 on Thursday before rebounding to $58,250 and closing at $55,850.”
“Despite the significant drawdown, BTC Spot ETFs experienced positive inflows last week, with about $238 million in net inflow,” he added. “The cumulative trading volume since inception is now around $315 billion, showing a decrease in trading activity. This aligns with expectations and typical market behaviour, as Q3 usually has the lowest trading activity. Thus, this data should not be seen negatively but rather as a seasonal trend, especially among traditional finance investors.”
Helping to support this view is the fact that on-chain trading volumes have remained consistent with the year-to-date average, Greco noted, “despite a decrease in BTC Spot ETF trading volumes compared to previous weeks and months.”
“Last week, BTC on-chain daily volume was around $41.1 billion, with a weekly volume of roughly $288 billion,” he said. “If this level of trading continues through July, the cumulative on-chain trading volume would be about $1.3 trillion, matching June's volume and approaching May's $1.4 trillion.”
Greco attributed a portion of the on-chain selling pressure to the start of Mt. Gox repayments as some of those investors have been waiting for more than a decade to sell their tokens. “Although investors might wait up to 90 days to access the funds, the official news of repayments, confirmed by the verified movement of 47,228 BTC from a Mt.Gox-associated cold wallet to a new address likely designated for repayments, triggered market reactions,” he said.
“Additionally, miners' selling pressure remains high due to the recent halving, which reduced mining rewards by 50%,” he added. “Although this selling pressure appears to be decreasing in recent days, it still exceeds demand, contributing to the negative short-term price action.”
The sharp drawdown has also “significantly reduced the extent of unrealized profits,” Greco noted, as long-term holders have emerged as the primary source of selling pressure.
“The MVRV ratio (market value vs realised value) currently stands at around 1.5, indicating an average unrealised profit of 50% among market participants,” he said. “This is a steep decline from the value above 3 observed in March, which indicated an average unrealised profit of over 200%. This trend suggests that recent price action was mainly due to long-term holders taking profits and selling their coins to new buyers at higher purchase prices, thereby reducing the average unrealised profit across the network.”
From a technical standpoint, John Glover, Chief Investment Officer at Ledn, noted that the Bitcoin chart “is showing that Wave 3 (orange line) has not yet completed and we are seeing wave (iv) of 3 finalizing now.”
“The dip to $54k should have completed wave (iv), however in the above-mentioned thin markets, prices can extend below expectations with a few large flows,” he said. “If we see a break below $48k we will likely see $44k before this sell off is complete, but that is not my expectation.”
“I believe that we will bottom near current prices and will see the next move up to ~$84k into the year-end,” Glover concluded. “It’s hard to stay bullish in the face of corrective sell-offs, but as they say; ‘fortune favors the bold!’”
Ed Hindi, Chief Investment Officer at Tyr Capital, also sees the current pullback as just a temporary pause in Bitcoin’s climb higher and maintains that we will see a six-figure BTC by the end of the year.
“Bitcoin is currently in correction territory as miners and governments sell off their BTC inventories,” he said. “We believe long-term investors and speculators will continue buying the dip. We see no reason to change our USD100k BTC 2024 target.”
As for the motivating factor behind Bitcoin's year-end rise, Hindi pointed directly to money printing by central banks who continue to struggle to get inflation under control.
“Central banks and governments globally will have no other option but to flood the market with cheap liquidity. This will lead to new highs for both BTC and Gold,” he said. “While still erratic, institutional capital is stabilizing Bitcoin’s price action. Bitcoin is slowly growing up, and maturing into an asset that has its place in all financial portfolios.”
Hindi also sees the growing “Digital Cold War” as a positive sign for the industry as the world’s top economies vie to lead the next phase of the digital revolution.
“We expect the US to fast track their crypto/Webb 3 regulatory work after the presidential election this year irrespective of the identity of the winner,” he said. “China will have to follow suit in order to continue competing in the now well-established Digital cold war.”
At the time of writing, Bitcoin trades at $56,420, a decrease of 0.66% on the 24-hour chart.
