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How long will the downturn continue? Examining the ups and downs of bitcoin

In recent months, events ranging from a ban on digital currency mining in China to pressure from regulators on digital currency trading activities have caused the price of bitcoin to plummet. Various metrics are now showing an imminent price jump, however can we hope for a return to the uptrend in the bitcoin market?

to the the report It is now three months since the Bitcoin price reached its all-time high. In the last two months, bitcoins have often been traded in the range of 30,000 to 40,000, a level that is 54% lower than the historical peak.

The market crash happened at a time when many analysts had predicted the exact opposite. They said that Bitcoin would continue to rise in price over the next few months. Some even predicted that the price of bitcoin would reach 6 digits this year.

What is happening? Is this fall only part of a reversal of the uptrend, or has the digital currency market really entered a long-term downturn similar to 2018?

Ascending signs

The historical trend of bitcoin price changes is logically correlated with howling cycles. Previous historical peaks were recorded between 12 and 18 months after Howing. Hawing is an event in which the bitcoin mining bonus is halved almost every four years. PlanB, a well-known analyst and creator of the Bitcoin S2F accumulation model, is a proponent of this hypothesis. He also believes that the asset-to-asset (S2FX) accumulation model predicts more uptrends for Bitcoin. He has repeatedly pointed out that the market has faced such declines before the start of previous uptrends.

Asset flow model is an evolved version of the flow accumulation model that predicts the future value of other assets in addition to bitcoin. This model has made one of the most accurate price predictions so far over the years. In addition, in-line data confirms the hypothesis that descending emotions will be short-lived. For example, shortly after the Bitcoin price peaked in April, traders abruptly shifted their assets to exchanges, ending eight months of uninterrupted accumulation.

Igneus Terrenus, director of public relations at Bybit Exchange, said short-term investors were the main reason for the fall in bitcoin prices from the recent historical high.

Ternos said:

A series of leveraging events caused many short-term speculators to suffer the most losses in recent months. While the satisfaction that existed at the beginning of the year is almost gone, the whales and long-term investors remain confident despite the general sentiment of a declining market.

However, trading platforms have seen capital outflows in recent weeks. One of the hallmarks of the Glassnode analytics website, which monitors investors’ willingness to sell their assets, appears to show similar patterns for previous price cycles.

How long will the downtrend continue ?;  Examining the ups and downs of bitcoin
Bitcoin exchange charts of digital currency exchanges

Richard Nie, an analyst and senior researcher at Bingbon, believes that the flow of bitcoins into and out of exchanges says it all. He agrees that these criteria indicate an upward shift.

Nieh said:

We need to consider the number of whales and the bitcoin inventories of digital currency exchanges. This is a strong bullish signal as more bitcoins are taken out of exchanges and transferred to personal wallets.

Mati Greenspan, founder and CEO of Quantum Economics, said:

Currently, the volume of digital currency transactions in exchange offices has reached its lowest level since the beginning of this year. As soon as the volume of transactions increases, this can be a good sign for the end of stagnation [بازار] Be.

Wider bullish signs

The budget of digital currency projects is another significant indicator of market sentiment. 2021 has been an extraordinary year for digital currency startups. The digital currency industry has seen $ 2.6 billion invested in its projects in the first three months of 2021 alone, more than the total budget allocated to digital currency startups in 2020.

The fall after April does not seem to have whetted the appetites of venture capitalists. In late May, Circle, which also offers the stable USCin digital currency (USDC), raised $ 440 million, followed a few days later by Galaxy Digital, led by Mike Novogratz. (Mike Novogratz) runs it, launched a $ 100 million digital currency investment fund.

In mid-June, Bloomberg reported that the volume of venture capital investments in digital currency projects had reached more than $ 17 billion. Even recently announced that it has invested $ 10 billion in launching its new exchange. Suffice it to say that the performance of digital currencies in the second quarter of this year has not affected the growth of venture capital investments.

Venture capital is the provision of start-up capital for start-ups. These forms of investments are known as risky or risky investments because of their high risk.

In addition, macro factors in the market must be considered. Amid skepticism about the world economy, some have predicted a stock market crash, including Robert Kiyosaki, author of The Rich Dad, Bipol Money. Kiyosaki has encouraged his fans to store gold and bitcoins. This can be seen as a sign of greater correlation between Bitcoin and the stock market. But can massive stock sales and falling market prices mean that investors are finally turning to bitcoin as a safe haven?

Another noteworthy point is the Bitcoin Taproot update, which is scheduled to launch in November. This is the first Bitcoin network update since the 2017 Segwit update. It is worth mentioning that the Segway update was accompanied by the recording of a new historical peak of $ 20,000 in December 2017. Understanding whether history repeats itself and whether there is a correlation between network upgrades and price is difficult, yet it is worth noting.

Monitoring devices are descending factors

Undoubtedly, the biggest downside of the digital currency market in recent months has been the pressure of regulators. The most prominent of these was the ban on the extraction of digital currencies by Chinese authorities, which caused widespread skepticism in the market. Many large Chinese miners were forced to cease operations. In some cases, these miners moved temporarily and even permanently to another country. This migration has undoubtedly cost Chinese miners dearly. At the same time, this incident has had a significant impact on the network, and the difficulty of extracting bitcoins has experienced the biggest fall in its history.

Legislators in other countries have also recently become more sensitive in this area. India, which in 2020 had somewhat backed down from its opposition to digital currencies, once again considered banning digital currencies, even though India’s digital currency ecosystem is still evolving.

The UK Financial Regulatory Authority recently launched a wave against Bainance, ordering the exchange to suspend all legal activities in the country. Many digital currency companies in the UK are currently withdrawing their licenses, while British Bainance users are being blocked from depositing money into their accounts by UK banks.

Bainance has come under pressure from regulators around the world in recent months for a variety of reasons. At the same time, it is not yet clear whether lawmakers have a problem with Bainance alone, or with the fact that the exchange is representative of the entire digital currency industry.

Organizational analysts have already made disappointing forecasts for the price of bitcoin. JPMorgan recently warned that the bitcoin market situation seems unstable in the medium term. These developments have not been as influential as the ban on mining in China, but they have certainly not helped boost investor confidence.

Daniele Bernardi, CEO of Diaman Group, a financial technology management company, believes there are now reasons to be cautious.

Bernardi said:

If we analyze the price of bitcoin based on the accumulation model, the price of bitcoin can triple in the short run. At Diamond, we have developed a model based on the bitcoin acceptance rate that shows that it makes sense for bitcoin to reach its historic high of $ 64,000.

Is the market trend changing?

How long will the downtrend continue ?;  Examining the ups and downs of bitcoin

Most of the benchmarks that indicate a bullish market trend are still halfway through. Now, can we say that there is enough evidence to reverse the current downtrend?

All the cases have been considered and it is not surprising at all, now it is too early to give a definite answer to this question. On the one hand, the controversies of regulators and the significant reduction in trading volume indicate a lack of widespread interest and interaction in the market, and on the other hand, some intra-chain metrics and indicators show signs of market sentiment that continues to rise a few months ago.

Finally, regulatory action continues to disrupt the market, and price forecasting models and venture capital investments in digital currency projects do not necessarily address traders’ concerns. If another massive pressure is added to these, the uptrend in the market will probably never resume.

The fact that the price has been maintained above $ 30,000 so far may be the biggest test for the miners’ activity, but it is also a testament to the upward force in the market. If the pressure on the monitoring devices continues to decrease, there is a good chance that the upward segment of the market will implement its projected plan.


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