Over the past 4 weeks, bitcoin added 70% in price, surpassing the $50,000 mark for the first time in the summer. Many market participants expect a new bull run in 2021, but analysts warn that several market metrics indicate the inability of bitcoin to demonstrate new rise.
The first metric of concern is the data on the number of bitcoins held in exchange wallets. Over the past week, more than 29,000 BTC were transferred to exchanges, according to Glassnode, and 16,606.8 BTC were placed on deposits of crypto exchanges on Monday. Blockware Solutions lead analyst William Clemente notes that investors usually transfer coins from their wallets to exchanges when they plan to sell them. The pressure from sellers could slow down the rise in bitcoin prices.
The second indicator, suggesting that bitcoin's growth may slow down, is the data on the bitcoins held in the wallets of large investors. According to statistics, the number of bitcoins on whale wallets (investors holding 1,000 to 10,000 BTC) decreased by 75,000 BTC over the past three weeks. When the value of bitcoin fell to $30,000 in mid-May, the whales, on the contrary, increased their crypto assets in anticipation of further growth and quick profitability.
“The failure to close the day above $50,000 shows some weakness in demand,” QCP Capital noted in its Telegram channel. QCP Capital does not anticipate exponential upward breakouts like the ones that occurred at the end of 2020. Analysts also note that GBTC shares were trading at a 14% discount on net assets on 23 August. “As a proxy for U.S. interest, GBTC should at least trade at par if we are to expect any strong follow-through in spot,” QCP Capital said.
The third metric is technical. “Bitcoin is coming into resistance at a 61.8% Fibonacci retracement level near $51,000, which would be a natural place for a short-term pause in the rally,” Katie Stockton, founder and managing partner of Fairlead Strategies. The weekly stochastic oscillator is also signaling overbought conditions in the cryptocurrency market, Fairlead Strategies analysts note.