• Bitcoin is vulnerable to a sell-off amid global anti-risk sentiment.
  • On-chain metrics imply that Bitcoin is well-positioned for recovery, once the volatility is over.

Bitcoin (BTC) partially regained the losses incurred at the beginning of the week; however, the upside momentum is still too weak to take the price out of the bearish territory and ensure a sustainable recovery. At the time of writing, BTC/USD is changing hands at $10,600. The pioneer digital asset has gained nearly 4% on a day-to-day basis, though it is still almost 3% down from this time on Friday, September 18. 

The coin bottomed at $9,819 at the beginning of September. Since then, the price has stayed below $11,000.

Stock market jitters could weigh on Bitcoin

While BTC managed to recover into the end of the week, the digital asset price may still be vulnerable to further losses. As we have previously reported, the escalating geopolitical tensions and the high level of uncertainty ahead of the presidential elections in the US create a robust risk-off environment on both traditional and cryptocurrency markets. 

Bitcoin is now correlated with the US stock markets, grossly overvalued and vulnerable to a sharp downside correction. A tiny bearish bit of news will be enough to send the stocks spiraling down by 10-20%. In that case, the cryptocurrency market will also feel the consequences. 

The head of the research company Ronnie Moas recently noted that BTC tended to follow the lead of the stock markets, and if the history is any guide, the coin will retest $9,000 before the recovery is resumed.  

A famous crypto twitter analyst from the Amsterdam Stock Exchange, Michael van de Poppe, shares the bearish view. However, he concluded that BTC should stay above the $10,000-10,100 region to retain the positive bias. If this barrier gives way, the sell-off may extend towards $9700 and potentially $9200.

Looking at the bright side of things

For a sustainable recovery, Bitcoin needs to break unhealthy relations with the stock market as they are economically ungrounded and even faulty. Once the dust settles, the cryptocurrency market will refocus on its internal drivers and find its feet. We will most likely have to live through the extreme volatility ahead of the US presidential elections before things are back to normal. 

External factors aside, Bitcoin bulls are just waiting for a chance to step in. 

Bitcoin's hashrate hit a new high on September 17, while the realized market capitalization surpassed the 2017/2018 yearly values and reached a new all-time high at $115.5 billion.

Bitcoin's realized market capitalization

Source: Coinmetrics

The realized market capitalization metric is developed by the cryptocurrency research data provider Coinmetrics. It is calculated by valuing each coin at the price it last moved on-chain. Meanwhile, the traditional market cap values all the circulating supply at the current market price.

However, coins on the centralized exchanges' wallets are not included in the metric, making it less accurate in terms of short-term price movements.

From the long-term perspective, the growing Bitcoin's realized cap is a bullish signal as it means that new investors are entering the market. The resent survey conducted by the crypto asset insurance company Evertas confirms the significant interest from institutional investors that may eventually pave the way to the cryptocurrency mass adoption.

Regulators play Bitcoin's fiddle

Good news came from the European regulators. The European Commission prepared a comprehensive draft proposal for creating a legal framework for digital assets that are not currently covered by the existing legislation. 

The document contains many tight measures. For example, the cryptocurrency-related companies will have to obtain special passports to provide services on the European Union territory. However, the community took it positively. 

Raoul Pal, Founder and CEO os Global Macro Investor and Real Vision Group, recently noted that the governments wanted to embrace the new technology rather than kill it.

Meanwhile, on the other side of the Atlantics, Loretta Mester, the President and CEO of the Federal Reserve Bank of Cleveland, confirmed that the central bank looked into the digital currency's pros and cons (CBDC).

The American central bank started creating and testing distributed ledger platforms before the pandemic. However, the lockdowns brought the importance of digitalization in the limelight and sped up the process.

Bitcoin whales come to rescue

Over 88,000 options are set to expire on Friday across the cryptocurrency derivatives exchanges. As we have explained earlier, the positioning on Bitcoin options creates a bullish setup; however, large expirations are accompanied by high volatility. The market may also stay in the range above $10,500 before the weekend to enter new options positions at a favorable price on Monday.

Meanwhile, Santiment's Holder Distribution metrics imply that large investors seek to add more BTC to their wallets. The chart below shows that over the past 24 hours, the buying pressure behind Bitcoin rose dramatically. The behavioral analytics firm recorded a significant spike in the number of addresses with over 10,000 BTC, colloquially known as "whales." Roughly three new whales joined the network. 

At first glance, the recent increase in the number of large investors behind Bitcoin may seem insignificant. However, when taking into consideration that these whales hold between $300 million and $3 billion in BTC, the sudden spike in buying pressure can translate into billions of dollars.

Holder Distribution 

Source:  Santiment

To conclude: Bitcoin may be vulnerable to further losses amid rising global jitters. Strong anti-risk sentiment and a sell-off on the US stock markets ahead of the presidential elections are likely to increase the selling pressure on the cryptocurrency market.

The first layer of support comes at $10,000-$10,100. Once it is broken, $9,000 will come into view. This psychological barrier will serve as a backstop and initiate the recovery.

From the fundamental point of view, on-chain metrics, including whales buying, growing hashrate, and record realized market cap, BTC is poised for a healthy recovery. The pioneer digital currency may retest this year's highest level, once it makes its way above $11,000.

The BTC/USD Forecast Poll has somewhat improved since the previous week as expectations on weekly time frame turned bullish. Now the experts believe that the risks are tilted to the upside in the short-run, though they still skeptical about the longer-term perspectives. The price expectations on all time frames except weekly moved above $11,000. It means that experts bet on a slow price recovery. According to the median price forecast, the first digital coin will stay range-bound above the current levels.

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