Like the little Coinbase QR code that bounced around the edges of your TV during the Super Bowl, Bitcoin has been stuck in a stubborn trading range for months. Some market watchers have a theory about what might be happening.
Consider this explanation: Long-term investors flounder whenever prices fall, according to Blockforce Capital’s Brett Munster. “This group of market participants has repeatedly been willing to step in and hoard coins at these lower prices, setting a floor for Bitcoin over the past two months,” he wrote.
On the other hand, short-term holders are underwater as long as Bitcoin remains below $47,000, and most are currently holding their coins at a loss. “Every time we start approaching that mark, there seems to be increased selling pressure likely caused by investors excited to just recoup their initial investment,” said Munster, who analyzed Glassnode data.
The result? Bitcoin has been holding onto a range between $32,000 and $47,000 which is proving difficult to break out of.
Matt Maley, chief market strategist at Miller Tabak + Co., also noticed the trend. “Long-term players are holding supply below the market,” he said. “However, a lot of people who bought Bitcoin in the last year are underwater. They seem to be using every bounce as an opportunity to take a few chips off the table with so much uncertainty around its ability to become a hedge against inflation.
Cryptocurrencies, like many other risky assets, have lost their luster in recent weeks as global central banks begin raising interest rates and Russia’s war on Ukraine sparks all sorts of speculation. ‘anxiety. Bitcoin, the largest digital asset by market value, has lost 15% since the start of the year and is down around 40% since its peak in November.
Chris Gaffney, president of global markets at TIAA Bank, says there’s a cohort of crypto investors who bought the coin a long time ago, they’ve seen huge gains and they don’t trade it or trade it. sell.
“Those who bought it cheap and are sitting on big wins are just going to sit on it,” he said over the phone. “But then traders, if they’re buying low and it’s sold out, they’re selling and they’re holding it in that range.”
Crypto prices have mostly mirrored movements in the US stock market, where dismay over the war in Ukraine, dwindling growth prospects and soaring commodity prices are dulling sentiment. Investors cut many of their riskiest bets, including in digital asset markets, although a long-awaited crypto executive order from the Biden administration was celebrated with a big rally on Wednesday.
But despite the better-than-expected news about the executive order, “overall crypto point performance remains somewhat directionless,” wrote David Duong, head of institutional research at Coinbase Global Inc. He cites the Ether-Bitcoin cross rate , which continued to trend lower and “which we often use as a risk barometer for crypto assets more broadly,” he said. “What it seems to be telling us is that risk appetite away from the perceived ‘safe havens’ of the asset class is still somewhat low.”
Meanwhile, Kraken is attracting interest from retail and institutional investors, according to Juthica Chou, head of OTC options trading at the crypto exchange. Some more active institutional investors could make opportunistic choices. “These moves, when you’re up 8%, down 8%, present a lot of opportunities,” she said on Bloomberg’s “QuickTake Stock” show. “On the other side are some of the institutions that build up over time and look at some of these entry points.”
There has been a lack of catalysts to spur new investment in space, Chou added. Although some investors are coming in now, there is still a lot of global uncertainty, so some participants will hold their cash until there is a positive catalyst.