The cryptocurrency market, including bitcoin, is showing signs of recovery, but could return to negative very soon as the macroeconomic environment remains very unfavorable.
The market capitalization of the crypto market has recently recovered to $1 trillion. However, it is still below its November 2021 peak by nearly 70%.
With this slight bounce, Bitcoin is up 4% on the day to hit $22,127 at the time of this writing. A price slightly above the strike price (the value of all BTC at the prices they were purchased divided by the number of BTC in circulation) of $21,963 according to Willy Wu’s analysis model.
On July 18, analytics platform Glassnode reported that BTC has been trading below its strike price for more than a month. Moreover, a number of signs indicate that capitulation is already underway.
“Therefore, there are many signals indicating that a real bottom formation may be taking place.”
Has Bitcoin hit bottom yet?
Massive deleveraging caused Bitcoin’s price to drop to a low of $17,760 on June 19th. Despite gaining 10.7% last week, the asset remains very limited and cannot break above this channel.
The realized price of a bitcoin is the value of all coins in circulation at the price they were last traded at. In other words, it is an estimate of the average price at which investors bought Bitcoin.
Since the start of the current bear market, Bitcoin has spent 35 days below its realized price (not counting today’s bull run). Glassnode points out that the asset has averaged 197 days below its strike price in previous bear markets, meaning we may still be far from the bottom.
According to the analytics platform, market trends and data online are similar to previous bear market lows. However, the time spent on the bottom remains relatively short. This means that the current momentum can only be fleeting and further losses should be expected before a long-term rally can occur.
“Amid extremely challenging macroeconomic and geopolitical turbulence, seasoned hodlers are driving BTC to peak investor saturation. This could lead to the formation of a “true bottom” that will last for several more months,” explained Glassnode.
After two quarters of negative GDP, the US is expected to announce another interest rate hike and recession. Something that could very quickly curb the bullish momentum of the cryptocurrency market in the short term.
Recently, many economists have been questioning Bitcoin’s status as a hedge against inflation, accusing it of not delivering on its promises.
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