Like Coinbase’s tiny QR code that bounced around the contours of your TV during the Super Bowl, Bitcoin’s price has remained in a stubborn range.
Like Coinbase’s tiny QR code that bounced around the contours of your TV during the Super Bowl, Bitcoin price has been stuck in a stubborn trading range for months. Some market watchers have a theory about what could be going on.
Consider this statement: According to Brett Munster of Blockforce Capital, long-term investors step in when prices fall. “This group of market participants has repeatedly been willing to step in and collect coins at these lower prices, laying a floor for Bitcoin in recent months,” he wrote.
On the other hand, short-term holders will be under water as long as Bitcoin stays below $47,000, with most currently holding their coins at a loss. “Every time we start approaching that figure, there seems to be an increased selling pressure that’s probably caused by those investors eager to just get their initial investment back,” said Munster, who analyzed Glassnode data.
The result? Bitcoin clings to a range between $32,000 and $47,000, which is proving tricky to break out.
Matt Maley, chief market strategist at Miller Tabak + Co., has also noticed the trend. “The long-term players are holding bids below the market,” he said. “However, many people who bought Bitcoin last year are under water. They seem to use every bounce as an opportunity to take some chips off the table with so much uncertainty about its ability to become a hedge against inflation.”
Cryptocurrencies, like many other risky assets, have lost their luster in recent weeks as global central banks begin to raise interest rates and Russia’s war on Ukraine sparks all sorts of fear. Bitcoin, the largest digital asset by market value, has lost 15% since the beginning of the year and is down about 40% since its record high in November.
Chris Gaffney, president of global markets at TIAA Bank, says there is a cohort of crypto investors who bought the coin a long time ago, they have seen huge profits and they are not trading or selling it.
“Those who bought it cheaply and made big profits just sit on it,” he said on the phone. “But if the traders buy cheap and it’s ramped up, they sell and keep it in that range.”
Crypto prices have largely mirrored movements in the US stock market, where consternation over the war in Ukraine, declining growth prospects and skyrocketing commodity prices are dampening sentiment. Investors have pruned many of their riskier bets, including in digital asset markets, although a much-anticipated crypto executive order from the Biden administration was celebrated with a major rally on Wednesday.
But despite the better-than-expected news surrounding the executive order, “the performance of crypto spots in general remains somewhat directional,” wrote David Duong, head of institutional research at Coinbase Global Inc. He cites the Ether-Bitcoin crossrate, which has continued to rise lower and “which we often use as a risk barometer for crypto assets in a broader sense,” he said. “What it seems to be telling us is that risk appetite outside the asset class’ perceived ‘safe havens’ is still somewhat low.”
Meanwhile, Kraken sees buying interest from both retail and institutional investors, according to Juthica Chou, head of OTC options trading at the crypto exchange. Some more active institutional investors may take opportunistic steps. “These moves, if you go up 8% and go down 8%, there are a lot of opportunities,” she said in Bloomberg’s “QuickTake Stock” broadcast. “On the other hand, some of the institutions that build up over time are looking at some of these entry points.”
There is a lack of catalysts to drive further investment in the space, Chou added. While some investors are coming in now, there is still a lot of global uncertainty, so some participants will keep their money in cash until there is a positive catalyst.