Is market stagnation over for Bitcoin?
It’s been a long two months for traders. Is it the summer lull that kept Bitcoin in a slump? Is the wait over? Retail traders are watching the latest Bitcoin rally and wondering, what’s really happening here?
If you’re a seasoned trader, you know it’s business as usual for Bitcoin.
The market stagnation for Bitcoin was the result of a number of factors that converged in May, taking the world’s first cryptocurrency from an all-time high of almost $65,000 to a low of $29,031. For seasoned Bitcoin traders, the market crash and dip during June and most of July may not have been welcome. But it’s par for the course when it comes to this digital currency.
“Volatility is as old as the hills, and it’s not going anywhere. It’s something you have to deal with,” Bill Noble, Chief Technical Analyst at Token Metrics told Time.com.
On-chain analysts at Glassnode agree. “We have an extremely divided market, and one with a likely expansion of volatility just around the corner,” it said in its July 19 newsletter, which analyzed the bear and bull cases for Bitcoin.
Many crypto analyses of the big dip and continued stagnation point to several factors impacting the coin’s price.
It started with comments by Tesla CEO Elon Musk, who sent the crypto market into a tizzy when he announced on Twitter that the company would no longer accept Bitcoin as payment for its electric vehicles, citing environmental concerns.
That sent the price of the coin toward its downward tumble as environmentalists jumped on the bandwagon. This was followed by the announcement by China, home to the majority of crypto mining operations in the world, that was cracking down on miners.
“In late May, China’s State Council signaled a crackdown on cryptocurrency mining, causing bitcoin’s price to plummet by 30% and casting a pall across the entire industry, which collectively lost over $1 trillion in value,” Time magazine reported.
The news was unsettling for the market.
“Crypto faced questions before, but they were largely a mix of curiosity and cynicism,” Chainalysis Chief Economist Philip Gradwell wrote.“Now, the industry needs to answer questions about environmental impact, use cases, illicit activity, and regulation.”
But it appears new traders were not willing to wait for the answers. The sell-off continued, fueled by newbies who entered the crypto market in a frenzy, hoping to ride the growing wave of interest in crypto and FOMO – “fear of missing out” on a potentially quick get rich scheme. As quickly as they entered the market, many exited.
“On-chain we can observe a notable bifurcation of reactions, with newer market entrants panic selling and realising losses, whilst long term hodlers appear relatively un-phased by the news,” Glassnode wrote at the time.
Even though Bitcoin HODLers stayed the course and bought the dip, the coin price remained stagnant as positive media coverage of crypto died down and the usual seasonal drop in trading, which has been observed in the crypto market for years, returned. Analysis of the crypto market performance in the past 10 years shows June and July are slow months on-chain as attention turns to holiday celebrations and summer vacations.
But don’t blink, because the crypto market appears to be moving again. Last week’s B-word conference featuring Musk, Square/Twitter CEO Jack Dorsey, and Cathy Wood, founder of ARKinvest, gave crypto a shot in the arm as the three voiced their belief that digital currencies will transform the world. Musk hinted that Tesla may accept Bitcoin as payment again. And speculation is flying that Amazon is planning to announce it will accept crypto payments at some point in the near future.
Has the stagnant market come to an end? That remains to be seen. But for the faithful trader, does it really matter?
“Long-term holders and bull market HODLers appear unshaken by volatility and lower prices,” Glassnode concluded in its bear and bull report. “The volume of coins held in illiquid state continues to grow, and the potential supply squeeze is coming from a much higher base than the 2018-19 bear. This demonstrates the remarkable conviction of BTC holders to weather extreme volatility.”
Joyce Pavia Hanson