Over the past weekend, Bitcoin’s price has experienced a significant rally, with the crypto asset reaching a high of $67,000. However, as of the time of writing, it has settled around $64,000. This surge in price has sparked discussions within the crypto community about whether Bitcoin has finally hit rock bottom or if there is more volatility to come.
Analysts from CryptoQuant have pointed out that on-chain metrics indicate positive momentum in the near term. Despite this optimism, there are concerns about the sustainability of this trend due to the stagnant growth in stablecoin liquidity and Bitcoin demand. Last week, BTC holders realized losses amounting to $2.5 billion, only to see the cryptocurrency rebound shortly after. This could be a sign of seller capitulation, often seen as a precursor to price bottoms.
One indicator that Bitcoin may have bottomed out is the decrease in selling pressure from major entities like the German government and the Mt. Gox rehabilitation estate. With the former running out of BTC to sell and the latter initiating the distribution process to creditors, there is a sense of diminishing downward pressure on the price of Bitcoin. Additionally, traders’ unrealized profit margins have dropped to incredibly low levels, signaling a potential turnaround in prices.
From a valuation perspective, analysts believe that Bitcoin’s price may have found a local bottom. The CryptoQuant P&L Index, which recently bounced off its 365-day moving average, suggests that the price could continue to rise in the near future. Despite indications that the market is still in a bull phase, there is a consensus that a new price rally leading to fresh highs is contingent on a surge in Bitcoin demand. Unfortunately, demand growth remains sluggish, hindering the possibility of substantial price increases in the immediate future.
One crucial factor that could pave the way for a sustained price rally is faster demand growth for Bitcoin. Currently, demand remains lackluster and is yet to show signs of significant improvement. Similarly, stablecoin liquidity, particularly from USDT, has not seen the accelerated growth needed to support continuous price hikes. It’s evident that for Bitcoin to break out of its current price range, both demand and stablecoin liquidity need to witness a noticeable uptick.
While there are signs that Bitcoin may have bottomed out, there are still several hurdles that need to be overcome for a sustained price rally to materialize. Traders and investors should remain cautious and closely monitor market indicators to gauge the cryptocurrency’s future trajectory.
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