VYSYN Ventures Weekly Insights #64 – Data suggests Bitcoin is weaker than the last time price traded near $50k
Bitcoin broke above $50K for the first time since May 2021, reigniting fervent bullish expectations that have not been present in the market since Q2. However, the move met strong selling liquidity around $51k, which happens to be a retracement level that holds importance regarding the future trend.
Bitcoin has since returned to sub-$50k levels and there is uncertainty over it’s direction from here. Market participants are also demonstrating uncertainty with contrasting action being taken by different entities.
In the latest VYSYN release, we detail the recent market movements and some of the factors that may have played into them. We also analyze current conditions and assess where BTC price may move from here.
Contrasting outlooks from Bitcoin market participants
(Source: TradingView.com)
John Bollinger, creator of the technical indicator “Bollinger bands”, has advised Bitcoin traders to “be on the alert”. Bollinger believes that the current chart setup could entice aggressive traders into opening short positions. However, he does believe that any dip would be temporary and a good opportunity for long-term traders to accumulate more BTC.
However, some major market participants are not waiting for a dip to enter. Michael Saylor’s MicroStrategy announced the purchase of an additional $177 million worth of Bitcoin.
American banking giant Citigroup is also planning an entry into the Bitcoin market. The banking behemoth is reported to be waiting for regulatory approval to begin trading Bitcoin futures contracts on the Chicago Mercantile Exchange (CME).
This difference in outlooks and market activity is prevalent across the market. In an institutional note, Coinbase noted varying activity from different investors.
“On the trading desk, we have seen both ends of this spectrum, with individuals taking profits and sitting in cash and institutions such as hedge funds and VC’s using these dips as opportunities to accumulate more BTC and ETH and continue to expand their altcoin portfolios”
Coinbase Institutional Report, 28th of August
Bitcoin technical indicators also mixed
We have also seen mixed signals in terms of what market indicators are suggesting. There is evidence that the Bitcoin market is predominantly driven by the recent trend and the short-term Bitcoin trend has certainly been to the upside.
However, onchain indicators suggest that conditions may be turning bearish. On-chain data reveals that there has been an increase in the flow of Bitcoins into centralized exchanges since price surpassed $50K.
Increased exchange inflow is a bearish signal that indicates that holders are moving their coins from individual wallets into exchanges to decrease their exposure. Perhaps, as predicted by Bollinger, aggressive traders are already engaging short positions, reflecting in the bearish candle on the BTC/USD daily price chart at the time of writing.
Another area of interest for traders during market rallies is trading volume. Bitcoin’s traded volume this time is relatively low, compared to what it was the last time that price reached $50K. Both spot and futures have been lower than the previous movements above $50k, suggesting that market participants may not be able to sustain the upside movements.
(Source: Skew.com)
In the Bitcoin futures market, indicators have also been less bullish. Funding rates in the perpetual market are lower than the previous move above $50k, suggesting less optimism from leveraged speculators who play a major role in Bitcoin market movements.
(Source: Skew.com)
Lastly, borrowing rates for stablecoin are significantly lower than the last run up. These lower rates also indicate less leverage on the upside. Less leverage would be indicative of more sustainable and healthy price rises if spot volumes were also higher than the previous run up. However, as highlighted above, spot volumes are significantly lower than the last rise.
How to trade uncertain conditions in the Bitcoin market?
In a previous post, we identified how Bitcoin whales were setting up to buy the dips by engaging in some behavioral patterns that are consistent with bullish runs. Bitcoin has been in an upward trend since this influx buying activity but the data above suggests that the price rises may not be sustained. However, the short-term trend is still up, giving rise to highly uncertain conditions.
Those with a long-term horizon should be unphased by the recent uncertainty in the market. However, those who swing trade and take shorter-term speculative positions in the Bitcoin may want to decrease their leverage and take smaller position sizes in light of the increased uncertainty.
About VYSYN Ventures
VYSYN Ventures is a longstanding venture capital company that specializes in funding and supporting disruptive startups in the blockchain and cryptocurrency industry. We have provided early-stage support to several projects that have grown to USD market capitalizations of hundreds of millions and even billions. Our incubation program focuses on providing capital allocations, versatile marketing support, and tech assistance.
