Bitcoin Market Analysis: June 20th — 26th

While providing slight respite to the events of the week prior, last week’s Bitcoin market still saw some notable trends occur that traders will be paying very close attention to. The market is hanging on the words of the Federal Reserve right now, but even in this context there was a stabilizing of the BTC price that hadn’t been observed over the previous couple of weeks. Long term holders have demonstrated signs of becoming more active in the market, which will make more Bitcoins available to those looking to take advantage of seemingly undervalued BTC.

The Week In Brief

In the week just passed, the short-term price of BTC has shown signs of stabilization, and many of its technical indicators demonstrate that the oversold market is showing a desire for recovery. The call-back bullish market will continue in the short term, however.

The weekly net withdrawal of BTC was more than 11,000 coins. Recent on-chain liquidation, along with the negative press about the markets, has led to a significant increase in the market demand for asset custody. Additionally, BTC’s recent low price levels have also attracted a number of investors to buy, so the amount of Bitcoin stock on exchanges has resumed its downward trend.

Investors who have held onto their Bitcoin for more than 6 months account for only 4%-5% of the times of selling, while the amount of selling accounts for less than 2%. This reflects that most long-term holders are less willing to sell their chips at current prices.

Price is still an important factor leading miners to decide whether to sell coins or turn off their mining machines. When miners decide to turn off part of their computing power, it often means that mining is unprofitable for now and prices have gone through a sharp sell-off. Therefore, when the short-term hashing difficulty average crosses the long-term hashing difficulty average, the price is usually at the bottom.

We believe that the short-term price recovery will continue due to the previous severe overselling, but in a slow and steady method. The on-chain data has remained healthy, and the current market price has fallen into a price area where miners will shut down their mining machines. Historically, the area is usually the market’s surrender bottom, and we wait to see whether history will repeat itself.

Any More News From America?

It’s been a quieter week than last week, however it still feels like the crypto world is spinning on the axis of the Federal Reserve’s announcements. The main reason why market expectations for Fed rate hikes are beginning to cool down is the potential risk of recession in the U.S economy. U.S manufacturing output in June fell below the 50 level that separates expansion from contraction for the first time in two years, while the preliminary PMI for the services sector hit a five-month low. U.S. business activity slowed significantly in June as rapid inflation reduces the demand in services and led to a broad contraction in factory orders and production.

Even if the United States is not yet in recession, market analysts said the signal PMI releases is more concerning because of a marked slowdown in some sectors of the economy, particularly manufacturing industry. PMI data suggest that U.S growth is falling, possibly faster than expected, which should allow the Fed to soften its stance at some point. The recent fall in commodity prices is seen as an inspiring sign — that’s exactly what the Fed wants to see, since commodities are one of the reasons that inflation is so high.

How The Market Is Looking:

Market expectations for an aggressive rate hike by the Federal Reserve cooled down after the latest PMI data was released. The odds of a 75 basis point hike in July and September fell to 68% and 22% respectively. The odds of a 25 basis point hike in December and a 25 basis point hike in February fell sharply too; comments suggest that the market is pricing in expectations. The cycle of rate rises will end well before the mid-term elections in November.

Last week, 11,000 BTC were withdrawn. Asset custody is now more in demand as a result of recent on-chain liquidation and the general negative press associated with many platforms. BTC’s recent low price has also attracted a number of investors to buy, so the amount of Bitcoin stock on exchanges has resumed its downward trend.

After hitting a new high of 65.7% in early June, the number of Bitcoins held for more than a year have continued to decline. As of the date of this report, data has this figure at 64.95%, indicating that some long-term holders have recently become fed up with the price decline and started to move Bitcoins — maybe even selling some.

Nearly two-thirds of Bitcoins that have been held for more than a year have not moved. Such a large number of remaining Bitcoin positions indicates that long-term investors are still confident with Bitcoin. Although some long-term holders have transferred or sold their positions, most long-term investors have little willingness to sell their chips at current prices.

The MVRV-Z score measures the deviation between the market value and the realized market value of Bitcoin. When this index is very low, it indicates that the market value of Bitcoin is very close to its realized value, which further indicates that the market bubble is very small. Historically, when this indicator falls below the 0 axis, it usually indicates that the market value is already lower than the realized market value corresponding to the fair transfer price of the on-chain token transfer, and the price has fallen seriously.

There are a lot of Bitcoins in Dormancy, meaning many are not actually in circulation — hence making the flow index of dormant Bitcoins held by entities at a new low. When large amounts of Bitcoin are not moved on the chain or traded on exchanges, it means that most of the coins are held by long-term holders, which makes the market even scarcer for tradeable BTC. While the fall in Bitcoin’s price has been volatile, it is still dominated by chips held by short-term traders and some long-term holders, which account for a small percentage of the total number of BTC in circulation. Therefore, as long as the market digests some of the selling pressure and shifts it into a “cold storage” state, the market’s supply and demand will become more unbalanced, which will lay a solid supply and demand foundation for the future bull market.

Realized losses have soared rapidly recently, and their value has been in the value area of several larger market surrender stages in history. Last week’s net realized losses in absolute amount reached $4.23 billion, a record high that is even higher than the 3/12 fall in 2020, which indicates that many losing chips showed signs of stopping last week and the market is in surrender bottom territory.

Looking Ahead

We believe that the short-term bullish market will continue due to the previous severe oversold. The on-chain data has remained healthy. The current market price has fallen into the shutdown price area for miners. Historically, the shutdown price area is usually the market surrender bottom, and we wait to see whether the events that have unfolded over the previous couple of weeks will result in matching historical trends or bucking them. The hope will be for a match.

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