Not the bottom yet: metrics portend the fall of Bitcoin

Margin trading is gaining momentum, and investment funds are recording an influx of investments in Bitcoin. However, the belief in the strength of the current support can be deceptive, as a number of indicators predict a decline in the $25-20 thousand zone.

The fall of Bitcoin by 55% from the historical maximum and the subsequent consolidation around the level of $ 29 thousand gave hope to some participants for a speedy recovery. This was reflected in the growth of weekly investments in Bitcoin funds to $126 million ($100 million for all cryptocurrencies), and the net inflow in 2022 amounted to $ 506 million.

Activity is demonstrated not only by institutional, but also by margin traders who trade using leverage. So, since mid–May, the largest cumulative position has been registered on Bitfinex – over 90 thousand contracts for the purchase of Bitcoin. The previous peak was 55 thousand contracts in mid-2021.

Such volumes could not do without whales, but this does not mean that this group cannot be mistaken. In 2021, traders deftly bought the bottom for the subsequent realization of profits, but in 2020 they failed and recorded losses.

Unlike margin traders, long–term holders (LTH) are not so optimistic – many of them are already getting rid of coins at a loss. As noted in CryptoQuant, the capitulation of LTH foreshadows reaching the bottom, and the next few months will open up an investment opportunity for expectant investors.

But, before the window of opportunity opens, the price will test the next level.

According to LookIntoBitcoin, the current “realized price” of Bitcoin is $23.6 thousand. The realized price is obtained by dividing the average cost of all Bitcoins (at the purchase price) by the total amount in circulation.

The fall of Bitcoin into the $25-20 thousand zone is likely to coincide with the decision of the US Federal Reserve to raise the key rate again. It is expected to increase by another 0.5%, the meeting of the regulator will be held in the middle of next week. An increase in the rate leads to an increase in the cost of borrowing and a decrease in the rate of turnover of the money supply, which is likely to lead to a strengthening of the US currency against most risky assets.