Battered Bitcoin fans start thinking about the bottom of the market
(Bloomberg) — There is a growing buzz in crypto investor circles and on Twitter about the hidden July rally in Bitcoin, which has cornered investors who are beginning to consider whether the largest digital asset has found a bottom.
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However, given the severity of boom-and-bust cycles in this sector, many also remain wary and unwilling to provide an all-clear signal given the mercurial nature of digital tokens – even when they see signs of Bitcoin emerging. I found a floor.
This is because it has happened so many times before – the coin is posting a brutal boom that turns out in hindsight to be nothing but a bear market bounce. Making such a call could be more difficult at the moment given that digital assets have traded all year along with US stocks, with plenty of disagreement among strategists over whether the worst of the sell-off is over.
Matt Malley, chief market strategist at Miller Tabak + Co. A liquidity asset right now, as long as the Fed is tightening, it will be hard for it to see a sustained rally. Second, the asset class has lost a lot of confidence with investors, so it will take time for that confidence to recover.”
Bitcoin has added nearly 15% over the past month through Friday, while other coins, including Ether, have posted better returns. Sean Cruz, chief trading strategist at TD Ameritrade, says there needs to be a shift in risk appetite before the currency can start to appreciate significantly.
Cruz said bitcoin “is likely to tread the water a little bit here.” “It’s a matter of waiting for the risk appetite to change.”
Many do just that – they monitor stocks for an indicative map of how things are going in digital assets. Noel Acheson, head of market insights at crypto lender Genesys, points to a survey conducted by Bank of America that showed bleak sentiment and potential capitulation for investors. Many stock watchers see the survey as a conflicting signal.
It’s also looking for something called a “production depleted payout ratio” for long-term bitcoin holders, meaning those who have spent at least five months on average. The reading is currently below 1, which means that even long-term holders are selling at a loss. She said that a drop below this level historically indicates an approaching bottom.
There are plenty of other analyzes to be found for Bitcoin. Analysts at Glassnode wrote that the coin and its siblings experienced “one of the heaviest and fastest bearish repricing events in their history,” which means that a lot of excess leverage has already been removed from the system. And in order to establish ground, investors need to experience a “massive surrender event,” which causes seller exhaustion.
They watch a metric called Realized Value, which shows the difference between the value of a coin at the time of disposal and the time of acquisition. They said it is often considered the takeover price of the chain to supply Bitcoin. At the moment it is showing an unrealized loss of -5% and all previous bear markets also tend to bottom below the realized price.
Glassnode analysts wrote: “A lot of signals indicate that a real bottom formation could be underway.”
Despite this, eternal optimism is a condition of being a cryptocurrency investor. Billionaire money manager Mike Novogratz recently stated that “the worst is over” in the crypto industry and that while some recent releases may have increased distrust among retail investors, the argument for Bitcoin remains strong. Meanwhile, Elon Musk, the sector’s best-known supporter, said his Tesla Inc. It sold a significant portion of its Bitcoin holdings, although he said the move should not be taken as a judgment on the currency.
For Alex Tapscott, managing director of Ninepoint Partners’ digital asset group, the bottom line is, though he doesn’t rule out a potential $19,000 retest. However, he said, “The risk and reward of Bitcoin is strongly skewed to the upside.” “For the long-term investor, this is a rare and exciting entry point.”
Whether it hits the bottom or not, it has huge implications for the sector – retail investors tend to shy away from buying when the market is in a recession. This group can slowly start to come back if the idea of a bottom has prevailed.
However, it is a risky task that we consider final, and not everything indicates everything. Glassnode analysts also refer to MVRV, which divides the market capitalization by the average purchase price. It is currently trading at 0.95, which is not a reading that is not the average depth of 0.85 seen during previous bear markets.
“This could mean further decline and/or require time for consolidation to establish a bottom,” Glasnode said. “However, it may also indicate a greater degree of investor support in this bearish cycle.”
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