Three Reasons Bitcoin Isn’t Rallying Despite Potential Bottom Hit: Details
Bitcoin is currently trading at $19,817 after falling to $19,513 on August 28. As reported by U.Today, according to an analysis by veteran trader Peter Brandt, Bitcoin may have hit a potential bottom after hitting the target of the rising wedge pattern it has been forming since mid-July.
After Bitcoin fell to a low of $17,567 in mid-June, on-chain research firm Glassnode noted several floor formation indications flashing for the leading crypto asset. It indicated that all Bitcoin macro indicators, from technical to on-chain, had hit record lows, which had previously occurred in cycles when the bear market floor developed.
But why isn’t Bitcoin rallying?
In a thread of tweets, Joshua Lim, Head of Derivatives at Genesis Trading, says that BTC lagged the performance of other crypto assets throughout the last cycle. “Most traders intuitively feel that BTC is trading ‘heavy’ – why is this happening?” Lim stated.
1/ BTC has lagged the performance of other crypto assets throughout the last cycle
most traders intuitively feel that BTC trades “heavy” – why does this happen?
there are two simple calculations we can look at to validate what we intuitively feel: pic.twitter.com/wOB30wJi6X
— Joshua Lim (@joshua_j_lim) 29 August 2022
He explains the reason why Bitcoin is still burdened. First, institutions are no longer “coming” as they are already here. The world’s largest asset manager, Blackrock, recently announced a private Bitcoin trust for its clients.
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According to Lim, BTC is already a significant part of most tradfi investors’ crypto allocations. This means that in addition to being an asset that is risk-free when the market turns, it is also an asset that is shorted as a beta hedge.
Second, according to the Genesis Trading expert, going short BTC remains the easiest option available to both traditional investors and those who invest exclusively in cryptocurrencies. BTC linear derivatives trade around $30 billion per day and still account for 44% of all open interest. Finally, BTC is not only used as a short leg against altcoins; it is also traded against shares or other risky assets, which weighs it down even more.
Per Glassnode, while the current market structure is undoubtedly similar to the bear market of late 2018, it still lacks the macro-trend reversal in profitability and demand inflows necessary for a sustainable uptrend. Therefore, the ongoing cycle bottom consolidation phase is most likely, as Bitcoin investors try to build a strong base that is subject to persistent uncertainty and adverse events in the macroeconomic backdrop.
