Bitcoin investor sentiment hits new low despite macro and equities uptick.

Bitcoin investor sentiment hits new low despite macro and equities uptick.

The Blockchain Industry: Traders Anxious Amidst Low Volatility and Declining Interest in Bitcoin

Bitcoin (BTC) broke through the $30,000 resistance level 40 days ago, marking a significant 19.5% gain in just a week. However, since then, it has been stuck in a consolidation range with occasional moderate corrections, trading near $29,300. While these consolidation periods are common in traditional markets, they have left crypto investors anxious.

Traders have become increasingly tense and their sentiment has worsened as Bitcoin repeatedly fails to break the $31,000 level. This increasing anxiety can magnify both positive and negative price swings, leading to euphoric and fear-led price action. It is crucial to understand these trends and the underlying factors driving them.

One factor contributing to traders’ anxiety is the historically low volatility of Bitcoin. Currently, the 50-day volatility is at 33%, the lowest in 6 months. This is in stark contrast to the high volatility observed for most of 2022, where it consistently reached 60% or higher. To put this into perspective, top global assets like Tesla and NVidia experience much higher volatility, with Tesla at 58% and NVidia consistently above 70% in 2021.

While volatility is often used to predict trends, it is important to note that it only provides information about the magnitude of daily price oscillations. Other metrics can indicate investor excitement or lack of interest, such as market share or dominance. On July 30, Bitcoin’s market share in the total crypto capitalization dropped to 49.5%, the lowest figure since June 16. This decline can be attributed to a favorable legal decision for altcoins, reducing regulatory risks for Bitcoin’s competitors.

Another sign of negative investor sentiment is the lackluster network activity of Bitcoin. The 1-year active supply, representing the sum of unique BTC transacted in the trailing 12 months, reached its lowest level since February 2016 at 6.0 million BTC as of July 26. This raises concerns, especially with the potential approval of spot ETFs in the U.S. While the decreasing number of Bitcoin moved on-chain might have been offset by the increased use of the Lightning Network, it currently holds only $138 million in Total Value Locked (TVL) and shows little growth in the past 30 days.

Bitcoin options traders are also losing confidence, as indicated by the “fear and greed” metric for Bitcoin options, the 25% delta skew. Currently, the 30-day metric remains flat at 1%, suggesting a balanced demand between call options and protective puts, signaling a neutral market. However, there has been a decreased appetite among bulls, with a discount on neutral-to-bearish put options between June 19 and July 29. This data strongly supports the notion that traders have become less confident since the $29,500 support level broke.

As the sentiment among investors worsens and indicators point to increased tension, the Bitcoin price faces mounting pressure in the near term. The declining dominance, lackluster network activity, and concerns in the options markets all contribute to the potential negative impact on Bitcoin price. However, on a positive note, if traders remain cautious and anticipate further downward movement, the likelihood of excessive liquidations among leverage traders is reduced.

In conclusion, the blockchain industry is currently witnessing anxious traders amidst low volatility and declining interest in Bitcoin. Understanding the factors driving these trends is crucial for investors seeking to navigate the market. While Bitcoin’s low volatility may cause anxiety, it is important to consider other metrics such as market share and network activity. The declining dominance and lackluster network usage, coupled with decreasing confidence among options traders, suggest challenges in the near term. However, cautious trading and measured expectations can help mitigate potential losses and contribute to a healthier market.

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