The world”s largest cryptocurrency, Bitcoin, is currently experiencing ongoing selling pressure, leading to a cautious outlook as experts weigh in on market trends. Recent data highlights that Bitcoin has remained within a downward trend, characterized by a horizontal range, where each attempt at recovery is met with renewed selling.
According to cryptocurrency analytics firm Glassnode, various market indicators suggest a “mild bearish phase.” The firm notes that significant capital inflows are lacking, which fails to offset the persistent selling from larger investors. This stagnation has resulted in an accumulation of unrealized losses, reaching a relative unrealized loss rate of 4.4%, the highest observed in two years. Such a trend signifies a transition from a phase of market euphoria to one marked by increased stress and uncertainty.
Alex Kuptsikevich, a senior analyst at FxPro, expressed that the cryptocurrency market has effectively entered a bear phase. He cautioned that any potential recovery efforts could draw in new sellers, further complicating the market dynamics. Since hitting an all-time high of approximately $126,000 on October 6, Bitcoin has lost nearly 30 percent of its value, closing the week flat.
Notably, Bitcoin”s recent movements have diverged from its typical correlation with other risky assets, as it has not followed their recovery patterns. Analysts attribute this to weak liquidity conditions and a diminished risk appetite following the US Federal Reserve”s interest rate cut, which failed to generate the anticipated momentum within digital assets.
Glassnode also pointed out a decrease in implied volatility, noting that historically, volatility tends to tighten further after the December 10 Federal Open Market Committee (FOMC) meeting, the last major macroeconomic event of the year. The firm suggests that unless there is an unexpected hawkish signal, declining volatility could lead to a low-liquidity environment as gamma sellers return to the market.
Mitch Galer, a trader at GSR, indicated that macroeconomic factors are increasingly influencing cryptocurrency price movements. He highlighted that the current restrictions related to the US government shutdown, along with an uncertain policy outlook and geopolitical tensions, have intensified the influence of trading flows on the market. Galer characterized these conditions as typical of bear markets, suggesting that while short-term volatility may persist, a potential recovery could emerge towards year-end due to the prevailing negative sentiment.
Conversely, Timothy Misir, the research director at digital asset analytics firm BRN, warned that the current market stability is precarious. He pointed out that low liquidity levels and fragmented exchange-traded fund (ETF) flows indicate that the sector is still seeking a clear direction rather than establishing a definitive trend.
