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28.06.2022 01:30 PM
Bitcoin looks "oversold," but is in no hurry to recover
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Bitcoin continues its recovery phase, and as part of a gradual consolidation, the asset managed to steadily gain a foothold above $20k. At the same time, there is an increase in network activity and a growing demand for cryptocurrency within the cryptocurrency industry. Social activity also indicates the passage of a period of panic and the gradual awareness of the onset of a local bottom. But at the same time, Bitcoin failed to gain a foothold above the 200-day moving average. This is a bearish signal and indicates the dominance of sellers in the market.

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The level of Bitcoin dominance in mid-June, before the historic capitulation, reached 48% due to the growing interest in cryptocurrency. As of June 28, everything has changed dramatically. The level of influence of Bitcoin on the market has decreased to 43%, and the altcoin market shows local growth. This is also a negative signal that indicates a decrease in investment activity in relation to the main cryptocurrency.

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Similar dynamics is demonstrated by the weekly report from CoinShares, according to which investors withdrew $420 million from Bitcoin. This is a record withdrawal of funds from a single asset, and therefore it can be assumed that this is the next stage of the mass capitulation of investors of all stripes. Recent information showed long-term hodlers that kept the cryptocurrency for 2-5 years also began to sell their stocks.

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Another important signal can be seen on the correlation chart of stock indices and BTC. The NDX and SPX indicators had a full bullish day and went beyond the local fluctuation ranges. Bitcoin did not, which indicates the ongoing capitulation of the investors of the first cryptocurrency. All these facts point to a radical decline in the investment attractiveness of BTC, even despite the stabilization of the situation and consolidation of the price above $20k.

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This is due to a total lack of liquidity and a tense situation in the market. Investors are not ready to enter the asset due to a significant outflow of capital. Do not discount the problems of miners who have accumulated a significant part of the BTC market supply in six months. If these reserves are sold, the market will collapse, and Bitcoin will update the local bottom. With this in mind, the lack of investment in a digital asset is now a positive signal indicating the strategic thinking of investors. The main task of the market now is to complete the process of capitulation of investors.

And there is an important technical indicator here that indicates how long this process can last. And, therefore, how long can the process of price stabilization and subsequent accumulation of BTC coins last to reach new heights. The 30-day average SOPR for long-term holders of Bitcoin goes into the red, which has happened only three times in history. In fact, this can be perceived as a process of capitulation of long-term investors.

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According to the historical context, the decline in the metric to this zone preceded the formation of a local bottom. The timing of the completion of the Bitcoin bear cycle took from 5 to 13 months. This suggests that the market has just begun the process of capitulation, which we have already seen with the outflow of capital from crypto funds. Given the global economic crisis, record inflation, and war in Europe, there is every reason to believe that the market and Bitcoin will recover for a maximum of time.

Artem Petrenko,
Analytical expert of InstaForex
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