This diagram from August 10, 2022 shows the virtual currency Bitcoin. REUTERS/Dado Ruvic/Illustration
Dado Lubitsch | Reuters
bitcoin The recent lack of volatility isn’t a bad thing and may actually be signaling a “bottoming out” in prices, analysts and investors told CNBC.
Digital currencies have fallen sharply since Bitcoin rose to $68,990 in 2021. However, over the past few months, Bitcoin’s price has stubbornly bounced around $20,000 in a sign that market volatility has calmed down.
20-day rolling volatility for cryptocurrencies last week Below Nasdaq and S&P 500 The index rose for the first time since 2020, according to data from crypto research firm Kaiko.
Both stocks and cryptocurrencies have fallen sharply this year as interest rate hikes by the US Federal Reserve and a strong dollar weigh heavily on the sector.
The correlation between Bitcoin and stocks has increased over time as more institutional investors invest in cryptocurrencies.
However, the Bitcoin price has been stable recently. Easing volatility bodes well for some investors.
Vijay Ayyar, international head of crypto exchange Luno, said: “Bitcoin has basically been in the 18-25K range for four months. When you think about it, it shows a pattern of consolidation and a potential bottoming out.” He told CNBC in an email comment.
“In previous cases, such as 2015, BTC bottomed out when DXY broke through, so a very similar pattern could play out here.”
Antoni Trenchev, co-founder of crypto lender Nexo, said Bitcoin’s price stability was “a strong sign that the digital asset market is maturing and fragmented.”
cryptocurrency is suffered a brutal comedown This year we lost $2 trillion in value from the height of the 2021 rally. Bitcoin, the world’s largest digital coin, has fallen nearly 70% from its peak in November.
The current so-called “crypto winter” is largely the result of aggressive tightening by the Fed. Large cryptocurrency investors with highly leveraged investments like Three Arrows Capital bottomed out under pressure on prices, further accelerating the market decline.
But some investors think the ice may be starting to melt.
According to Ayyar, there are signs of an “accumulation phase” where institutional investors are increasingly willing to bet on Bitcoin given the price lull.
“It would get boring if Bitcoin stayed in such a range, but this is also the time when retail loses interest and smart money starts accumulating,” said Ayyar.
Matteo Dante Peruccio, president of international division at digital asset management firm Wave Financial, said, “At a time when interest in traditional markets is generally waning, traditional institutional demand for cryptocurrencies is intuitive. On the contrary, it is increasing,” he said.
Despite falling prices and waning interest from retail investors, financial institutions continue to engage in cryptocurrencies.
Services announced by Mastercard Allowing Banks to Offer Crypto Trading,before New blockchain security tools For card issuers. On the other hand, visa Partnership with virtual currency exchange FTX Provide a debit card linked to the User’s trading account.
goldman sachs It suggested that we may be nearing the end of a “particularly bearish” period in the latest cycle of cryptocurrency movements. In a memo released on Thursday, bank analysts said the price was similar to Bitcoin’s trading in November 2018, when it stabilized for a while before rising steadily.
“low volatility [in Nov. 2018] A Goldman analyst added that a “crypto QT” (quantitative tightening) has occurred as investors. Poured out of a stablecoin like Tether, reducing liquidity. The circulating supply of USD Coin, a US dollar-pegged stablecoin, has decreased by $12 billion since June, while the circulating supply of Tether has decreased by more than $14 billion since May.
Selling pressure has also eased as bitcoin miners have reduced their cryptocurrency sales, suggesting the worst of the mining space may be over. Listed bitcoin miners sold 12,000 bitcoins in June and only about 3,000 bitcoins in September, according to Goldman Sachs.
Wave Financial’s Perruccio predicts that the second quarter of next year will mark the end of the crypto winter.
“We will see more failures in DeFi [decentralized finance] A space that is absolutely necessary for the industry to evolve, a lot of small players,” he added.
James Butterfill, head of research at crypto asset manager CoinShares, said it was difficult to draw many conclusions at this stage. However, he added, “We misunderstand that there is more potential for price increases than for prices to fall further.”
“While the largest recent outflow was in Bitcoin short positions ($15 million this month, 10% of AuM), there have been small but steady inflows into Bitcoin longs over the past six weeks. I saw it,” Butterfill told CNBC via email.
According to Butterfill, the main factor leading to more buying of bitcoin will be a signal that the Federal Reserve (Fed) plans to ease its aggressive tightening.
The Fed is expected to raise interest rates by 75 basis points at next week’s meeting, but central bank officials reportedly We are considering slowing down the pace of future increases.
“Clients say they will start adding positions to bitcoin once the Fed pivots or approaches it. It suggests that short-sellers are beginning to surrender.”