If you have been closely watching the crypto, or even invested in it, chances are that you are wondering whether the latest bear cycle is over. The truth is that the market remains unpredictable especially in the long-term. Despite this, here are some opinions and observations will help you to better understand the current market state.
We recently witnessed heavy liquidations in the Bitcoin [BTC] space. Some investment companies that dabbled in Bitcoin, such as Celsius went bankrupt during the latest crash. The bear market liquidated many highly leveraged positions. Companies such as Tesla that had recently invested in BTC dumped their holdings.
Tesla sold 75% of their #bitcoin this week, and then Bitcoin just made another block and kept on keeping on.
— Lark Davis (@TheCryptoLark) July 23, 2022
Assessing the market outlook
Despite the heavy outflows, Bitcoin still managed to promptly recover above $20,000. The recovery demonstrated Bitcoin’s strength despite being stress tested against highly volatile and unfavorable market conditions. Could this outcome be a sign that the market is ready for a bigger recovery?
A look at some metrics may help provide a clearer picture of BTC’s current position. For example, addresses holding more than 100 BTC have drastically reduced their selloff. The number of such addresses increased substantially since mid-June, thus supporting Bitcoin’s bullish performance.
A slight drop in the same metric in the last few days suggests the likelihood that increased selling pressure may prevent more upside in the short-term. BTC balances on exchanges have been all over the place during the month but outflows and inflows have relatively balanced out. However, the total addresses metric indicates that the number of addresses has grown steadily during the last 30 days.
However, the balance on exchanges has notably reduced in the last few months. This is a healthy sign as far as Bitcoin’s long-term performance is concerned. It highlights strong demand at lower price levels. Investors have thus been taking advantage of the lower prices. However, some exchanges might experience higher balances because of long-term increases in trading volumes.
When I read Glassnode reports bitcoin leaving exchanges, I was always like "huh?" The graph below explains it. Over shrinking, but Binance (and BFX) growing.
Also shows relative size of exchanges, on this dimension. pic.twitter.com/7CPWhUJOQp
— CZ 🔶 Binance (@cz_binance) July 23, 2022
Bitcoin’s risk-on nature and the FED
It is no secret that most of the top investors in Bitcoin have been holding it as a risk-on asset. This means they have been selling or avoiding BTC when the U.S Federal Reserve started raising rates. If this trend continues, then we will likely continue to see more selling pressure in on Bitcoin. A softer approach on interest rates may support more upside.
While the FED holds a chip over BTC’s shoulder, other factors will influence its short-term and long-term performance. Regulations and investor sentiment still have a substantial impact on BTC’s performance. For instance, favorable crypto laws from the SEC might favor crypto bulls. The fact that the market recently bottomed out is also a healthy sign and improved investor sentiment since June may encourage more buyers.