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A Bitcoin rebound is vulnerable to macro pressures.
Dreamstime
Bitcoin
and other cryptocurrencies were beginning a recovery on Thursday after a selloff plunged digital assets below key levels earlier in the week. But the macro picture for markets – and key indicators from crypto itself – suggests that any pullback is vulnerable.
The price of Bitcoin has risen 2% in the past 24 hours to $19,200, rebounding from Wednesday’s low near $18,500, which was around the all-year low for the biggest crypto. Bitcoin is now well outside the $20,000 to $25,000 range where it has stagnated since mid-June, when a dramatic selloff in digital assets knocked the token down from $30,000.
“It’s not looking good for crypto, with bulls perhaps hoping that sentiment in the broader markets can sustain some of yesterday’s boost,” said Craig Erlam, an analyst at broker Oanda, adding that Bitcoin “appears to have quickly gained resistance around $19,500 where it had seen strong support in late August and early September.”
The immediate pressure on crypto prices comes from the macro environment. While Bitcoin should theoretically trade independently of mainstream finance, it has been shown to be correlated with other risk-sensitive assets, such as stocks, after
Dow Jones Industrial Average
and
S&P 500
relentlessly lower in 2022. To blame has been high inflation for decades that pushed central banks to aggressively tighten financial conditions, making risky bets like Bitcoin less attractive.
But trends in crypto itself make Bitcoin look all the more vulnerable.
“On-chain analytics also show bearish sentiment among market participants,” said Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, referring to data analysis from the Bitcoin blockchain.
Sotiriou pointed to an indicator called Bitcoin’s Adjusted Output Profit Ratio (SOPR), which reflects how much profit is made from all coins moved on-chain during a given period. The indicator, maintained by crypto-intelligence firm Glassnode, showed that the rally has been met by a rise in SOPR as traders attempt to sell as close to a profit as possible. But this selling pressure has a negative impact on prices.
“Investors cash out during bear market rallies,” Sotiriou said. “This indicator suggests that investors are selling to ‘get their money back’ at their own expense.”
“I think the mainstream narrative of a recession and high inflation has caused fear among market participants,” the analyst added.
Beyond Bitcoin,
Ether
— the second-largest crypto — jumped 7% to over $1,600 as bullishness among investors returned as the crypto market eagerly awaits a fundamental update to the Ethereum blockchain known as “The Merge.”
Altcoins, or smaller cryptos, were also stronger.
Solana
got 5% and
Cardano
was up 2%. Memecoins rose, with both
Dogecoin
and
Shiba Inu
around 1% higher.
Write to Jack Denton at [email protected]
