Bitcoin Investors Gripped By Fear, Any Signs Of Hope Remains?

Bitcoin is moving sideways after a big bear attack drove it below its 2021 low. The number one cryptocurrency by market capitalization appears to be showing low volatility in the short term and could see further declines, according to market participants’ expectations.

Related reading | Coinbase is in a downward spiral and could take your crypto with it

At the time of writing, the first cryptocurrency by market cap is trading at $30,400 with a gain of 1.5% over the past 24 hours.

BTC is moving sideways on the 4 hour chart. source: BTCUSD TradingView

The collapse in the bitcoin price was caused by a shift in the US Federal Reserve (FED) policy. The financial institution has begun to tighten its monetary policies after years of low interest rates and high liquidity across the markets.

According to the post Report From on-chain research firm Glassnode, Bitcoin entered bear market territory in 2021. At that time, expectations for higher interest rates from the Federal Reserve saw an increase.

The company believes that the May-July 2021 sell-off was the “genesis” of the current bear market. This coincides with a lower compound annual growth rate (CAGR) for Bitcoin and Ethereum.

This metric is used to measure returns and has been declining every year since BTC became a tradable asset. The research firm said that the recent decline in BTC returns is worse than when the cryptocurrency crashed from the middle of about $50,000 to $42,000.

As shown below, Glassnode claims that this CAGR is down or returns to coincide with the beginnings and ends of the bitcoin bear market. In terms of returns, May-July 2021 behaved similarly, even posting a steeper decline than today’s negative 30% drop in this metric.

Source: Glassnode

If history repeats, Bitcoin should see some respite in the short term. This potential bounce may not indicate the final bottom of the downtrend.

Players bet on more future Bitcoin price movement

Market participants anticipate this scenario. Glassnode noted that over the next two to three months, there will be an increase in the number of options to sell (sell) bitcoin.

The strike prices for these options are $25,000, $20,000 and $15,000. The research firm claimed that the options to go (go) are lower as most bullish traders aim for a rebound to $40K over the same period. Glassnode said:

This indicates that until at least the middle of the year, the market has a strong preference for hedging risk, and/or speculating on further downward price movement.

Related reading | Bitcoin Reclaims $30K Area After Last Weeks Struggle – Analysts Weigh

In the long term, the options market is bullish. By the end of 2022, players set their strike prices at around $70,000 to $100,000.

Source: Glassnode

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