Bitcoin: Will patience be rewarded?

Market overview

The crypto market capitalisation has once again shown little change, remaining around the $2.19T ‘centre of gravity’ for the third day running, fluctuating between $2.18T and $2.20T. This marks the continuation of a protracted sideways trend that has been ongoing since early June. As traders become accustomed to a range, they tend to tighten their stop losses and increase their leverage. It is also not uncommon for the market to be pushed down during what is known as ‘final capitulation’. However, towards the end of a range-bound period, large volumes often emerge as major long-term players gradually build positions around a particular market view. In this case, they may be anticipating the passage of cryptocurrency legislation later this autumn, following the congressional recess. Our medium-term optimism does not, however, rule out the risk of a sharp pullback in the coming weeks.

Bitcoin is struggling to break away from its support level and has been hovering around $64K for the third day in a row, trading slightly below it on Thursday morning but above the 50-day moving average. The peaks of the 2021 bull market were close to these levels. Three years ago, Bitcoin’s decline generally halted at $20K, which was close to the peak of the previous bull market at the end of 2017. This supports our view that the decline may have run its course, with bearish momentum fading as Bitcoin approaches the 200-week moving average. While speculators may still be looking for a better entry price, long-term investors are steadily accumulating at current levels, as evidenced by the remarkable price stability despite fairly active price movements in other markets. At the end of 2022, the market fell nearly 25% below $20K before reversing higher, effectively offering a ‘discount’ to investors willing to take the risk. We could see something similar this time, but it would be unwise to rely on such a pullback.

News background

Bitcoin’s prolonged downtrend has reached a ‘point of exhaustion’, as selling pressure on the asset has eased, according to Fairlead Strategies. However, the weakening of downward momentum does not, in itself, guarantee an immediate market reversal.

Twenty One Capital reported a net loss of $413.5 million for the second quarter due to a fall in the value of the leading cryptocurrency on its balance sheet. The company, which ranks second among public corporate holders of Bitcoin, owns 43,514 BTC worth approximately $2.8 billion.

Phong Le, CEO of Strategy, has promised to resume Bitcoin purchases by the end of the year. He emphasised that the volume of purchases is “approximately 25 times greater” than sales: since January, the company has acquired 175,000 BTC but has sold only around 7,000 BTC. According to Phong Le, Strategy is the “JPMorgan of the digital economy”.

Bitcoin miners’ revenue from transaction fees remains close to 10-year lows, Glassnode notes. Last July was, on the whole, the least profitable month for miners in nearly three years. Transaction fees have accounted for less than 1% of revenue for the past year.

Spot trading volume on crypto exchanges in July fell by 21.7% compared with June, according to figures from Wu Blockchain. For the first time in three years, the figure failed to reach the $500 billion mark. Activity in the futures market was seven times higher than in the spot market.

On 12 August, due to a routing failure at the infrastructure provider TeraSwitch, validators accounting for 28.8% of Solana tokens in staking were taken offline simultaneously. The figure approached the 33.34% threshold at which the network would have ceased finalising transactions.

Two short positions on Bitcoin, with a combined value of over $210 million and 40x leverage, have been opened on the Hyperliquid platform. Their liquidation levels are close to $64.1K and $64.6K, respectively.

One of Hong Kong’s first crypto-millionaires, who began investing in cryptocurrency in 2013, has been found dead in Paraguay. In the first half of the year, 46 attacks on cryptocurrency holders were recorded, with losses exceeding $30 million, according to Chainalysis. 

Summary: The crypto market is stuck in a sideways trend: Bitcoin is holding steady at $64K, but the risk of a brief dip remains, in line with historical patterns.