Is Bitcoin on the Threshold of a Collapse?

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Bitcoin represents an important sentiment indicator, because it indicates in advance whether the barometer needle is about to move from risk on to risk off or vice versa.

Contrary to the strong performance seen on stock markets, the price of Bitcoin remains firm. In March, the price of Bitcoin set a new record, exceeding the $70,000 level twice, although marginally compared to the previous all-time high in 2021.

The expectation of bullish speculation was based on the flows that would arrive thanks to the approval of the first spot ETFs on Bitcoin in the United States, in addition to the upward contribution deriving from the fourth halving of Bitcoin, which then materialized in the third week of April.

The Halving and Controlling Inflation

The halving was designed from the outset by the creator of Bitcoin to reduce the supply of the number of Bitcoins in circulation, with the aim of controlling inflation in the price of the cryptocurrency.

While the available quantity of circulating money increases and decreases based on the decisions of central banks, the maximum quantity of Bitcoin in circulation was originally set at 21 million Bitcoin and is immutable.

Currently, just over 19 million have been created, so there are still less than two million left to create.

Therefore, the increase in demand should not have met a corresponding increase in supply, creating a bottleneck that would have pushed Bitcoin prices higher.

The enthusiasm continued, but prices stopped rising. For a couple of months, despite massive purchases by whales, Bitcoin prices remained in a price range.

In short, the ingredients for the rise seemed to be all there, but something is going wrong.

Excess Optimism and Contrary Voices

Recently, a new report from Bernstein predicts that Bitcoin could reach $1 million by 2033 and a cycle high of $200,000 by 2025.

Bernstein’s optimistic forecasts for the price of BTC are motivated by the increase in demand from spot ETFs and the limited supply of cryptocurrencies.

Bernstein now predicts that Bitcoin could reach $500,000 by 2029, revising his 2025 estimate upwards from $150,000 to $200,000. The only negative voice that emerges from the chorus of optimists is that of the well-known trader Peter Brandt, who stated that Bitcoin could still slip below $50,000, if what remains of the bid support were to give way.

Brandt also doesn’t rule out the possibility of new long-term lows below the 2022 lows. The last time Bitcoin traded below the $50,000 mark was in mid-February, a month before hitting current all-time highs of 73,800 $.

Tug of war between Buyers and Sellers

In June we saw a significant increase in cryptocurrency ETF investments, around $2 billion, long positions awaiting a rate cut in the United States.

Over the past five weeks, total cryptocurrency inflows amounted to $4.3 billion, and investor interest was primarily focused on Bitcoin, which accounted for $1.97 billion.

In contrast, Bitcoin short positions saw outflows for the third consecutive week (around $5.3 million). Despite these buying flows, the previous highs above $70,000 have become formidable resistance, because there is a huge amount of ‘ask’ around $70,000 and above.

To overcome the highs you need some unexpected positive surprises, because at the moment “all the good news are in the market”.

Over the past month, the average monthly change in demand among retail investors, those with a transfer volume of up to $10,000, decreased by 17%.

The main reason for this is that miners are experiencing severe difficulties after the April halving, which ultimately led to many sales, thus increasing operating costs and reducing rewards, thus keeping the price of Bitcoin low. Additionally, FlowBank, which has ties to Binance, has gone bankrupt, further complicating matters.

What does the Technical Analysis Indicate?

In the short term, the daily chart signals a double top at levels just above $70,000 and the downward break of the last ascending trendline that started from the May lows.

There is also a break of the latest trading range between 67,000-72,000, although it is a marginal break that needs confirmation given the strong volatility in Bitcoin prices.

The weekly chart is much more disturbing, especially the downward “head and shoulders” that formed on the RSI technical indicator, a figure that normally anticipates a negative medium-term price performance.

The next 2 weeks will be decisive for the trend of Bitcoin in the coming months.

Our Advice

In such an uncertain market environment, it is essential for investors to maintain a disciplined and well-diversified investment strategy. Here are some tips:

Constant Monitoring: Keep a constant check on your Bitcoin holdings and any macroeconomic developments that could affect the price.
Diversification: Don’t put all your assets in Bitcoin. Diversify your portfolio to reduce overall risk.
Professional Consulting: Reach out to expert financial advisors to get personalized advice based on your financial situation.

That’s why we are here…

Flavio Ferrara – Independent Financial Advisoris here to help people invest consciously, starting from what we know we don’t know and using simple, calm and engaging language.