Defying the predictions of many well-known crypto analysts, the price of the cryptocurrency blue chip Bitcoin took a rather unexpected southward turn over the last week or so, dipping yet again below the $7k mark. Where to now though? Since the above-said hit, the price has been trading sideways, unsure of which way to head. Have the BTC bulls been exhausted for good? Some say yes.
A couple of short weeks ago, BTC was trading at $8.500, and it seemed to be on its way up. The latest price-drop was indeed what one would call a true demonstration of power on the part of the bears. It saw the top cryptocurrency shed some 21% of its value, hitting lows below the $6.9k mark.
With that in mind, the current stalemate-like situation might even be considered a sign of bearish exhaustion, and maybe even a build-up stage for yet another short-term bull run. The way things are right now, the balance may tip either way.
In order to trigger the above-mentioned shot-term rally, the price would have to gain acceptance around the $7.1k mark – something that does not appear to be probable right now. Even if successfully triggered, the rally wouldn’t be a major one: it would likely only take the price to the resistance level defined by the 100-day MA, which is currently situated at the $7,474 level.
On the other hand, the bears only need to generate a decline below $6,890, to trigger a further dip. This dip may bring the price down to around $6,700.
Though during times of indecision and minor price movements, we like to rely on technical analysis, falling back on the fundamentals seems to be the most common-sense path this time around. The fundamentals do not look good though, at least not for the short-run, and by that, we mean remainder of this year.
Indeed, there are several fundamental factors lined up behind the current BTC weakness and though ignoring them is always an option, that will simply not make them go away.
The first such factor is tied to the decreasing profitability of mining, or more precisely, to the selling that this phenomenon has triggered among miners.
Trading volumes have always been relevant indicators of the exact bull/bear balance within the market, and right now, they are down as well.
Those waiting for institutional investors to liven up the scene won’t be pleased to learn that the earliest time a Bitcoin ETF will land is 2019. Until then, judging by the current levels – institutional interest will be rather weak. According to a poll, some 0.5% of US investors are considering securing a stake in the digital currency. Big institutional actors, such as mutual funds and pension funds, are sitting out the ride for now, as they are less than comfortable with currently existing custody solutions.
Certainly, there are hopes for an ETF approval in September, but these hopes are frankly quite likely to be dashed.
Merchants’ BTC revenues have dropped quite significantly as well, obviously suggesting that fewer people are using the payment solution to purchase goods.
That said, the fundamentals are not particularly kind to the bears either. The Chinese Yuan is dropping like a stone against the USD, something which may trigger a flight to Bitcoin in the world’s most populous economy.
Furthermore, though remote at this point, the possibility of a BTC ETF is still definitely there in the long-run. Such an ETF will almost certainly put the wind back into the sails of “digital gold”, big time.
Then, we have BTC dominance, which is definitely gaining ground, and which entrenches the ecosystem more and more each day.