BTC Death Cross is Coming: What Does it Mean for Bitcoin?
Bitcoin can't get a break as prices get a beating on low volume amidst a shift in Fed’s policy, but even a death cross is followed by a bullish golden cross and “appetite for venture funds is through the roof,” with MicroStrategy receiving $1.6 billion in orders for its latest offering.
Last week’s recovery attempt faded this week as the Bitcoin price fell to nearly $31,000, but we are back above $34k today.
While Bitcoin is keeping within its range, it continues to print lower highs which could result in another test of $30k.
Adding to the fear factor is the looming death cross, which occurs when the short-term 50-day moving average (red) crosses below the long-term 200-day moving average (blue), and it seems “unavoidable” at this point.
While this indicates, “prices may remain subdued for a while to come,” at the same time, “a death cross is always eventually followed by a golden cross (basically the opposite), which is a very bullish sign,” wrote analyst Mati Greenspan in his daily newsletter Quantum Economics.
The price bottoming out here can probably bring us a strong rally, but caution is needed as the last two bitcoin death crosses turned out to be false signals, and the one before that solidified crypto winter.
The May selldown stopped comparisons to 2017's bull run. How about 2013's? It saw a selldown of -70% over 3 months, before surpassing the last ATH by 4x.
Is this bull market over? Unlikely. This marks the *first time* the 111DMA did not surpass the 350DMAx2. pic.twitter.com/BFlPSGxVbH
— Mira Christanto (@asiahodl) June 9, 2021
Sentiments in the market have changed significantly in terms of “extreme fear,” lower activity on exchanges, on-chain activity also decreasing sharply, and future premiums are almost gone completely.
Volume is actually at the lowest level of 2021 as traders lost their appetite for cryptocurrency in the current uncertain environment. Additionally, with the contango for the 3-month bitcoin futures gone, the spot price and futures contract are almost trading at the same price, indicating a more bearish sentiment among futures traders.
As we reported, bitcoin investment vehicles also recorded the first month of net outflows surpassing net inflows in May, which continued in the first week of June. The aggregated sum of BTC under management is now down by 18k BTC in the last month.
Byron Wien: “I’m not a big fan of Bitcoin at this point. I’ve been studying it and I wonder if it’s a geriatric thing I can’t bring myself to buy it.”
Wien is 88
— zerohedge (@zerohedge) June 9, 2021
Why the Dump?
Unlike the previous drop under $30k, this week's sell-off, which took place on relatively low volumes, wasn’t driven by Elon Musk’s tweeting or China FUD. The weak market structure remains unresponsive to any positive news and is simply reacting negatively to any development.
Some feel the FBI getting its hands on the BTC paid in ransomware by Colonial Pipeline is the reason for the same. But that doesn’t seem to be true. Not only it shows that it is easier for authorities to catch criminals who use crypto than anything else like cash, but also the FBI was only able to breach the Bitcoin wallet because of sloppy storage.
While the agencies are boasting their tools, the cybercriminal gang DarkSide used a centralized payment server that was easy to track.
Another potential explanation for the crash is the latest shift in the Federal Reserve's policy. With the crypto market’s bullish base case relying heavily on the money printing by central banks, “it is mildly upsetting that the Fed has recently begun to soak up liquidity in its largest-ever reverse repo operations,” said Greenspan.
As of right now, the Fed is pumping about $120 billion worth of liquidity into the market on a monthly basis, but now they are soaking up the excess liquidity through reverse repo operations.
But with stocks and bonds not even flinching on this action, it doesn’t seem likely that crypto would be more sensitive to Fed policy than the stock market.
Interest is Amped up Still
However, the company received about $1.6 billion in orders for the offering, including interest from a large number of hedge funds, reported Bloomberg citing people familiar with the matter. This strong interest in Bitcoin came despite the latest drop in the value of the crypto.
Here's a question for those fretting about the high interest rate of Microstrategy's latest bond offering.
Who would you rather lend money to, Microstrategy at 6% for 7 years backed by bitcoin, or Colombia at 6% for 7 years backed by the Colombian government?
— Alex Krüger (@krugermacro) June 8, 2021
According to Jonathan Cheesman, head of institutional sales at the crypto exchange FTX, it's very natural to see the ongoing uncertainty after a big period of deleveraging.
“There may just be some very gradual chips off the table. And that money that I hope and trust to be on the sidelines looking up at cryptocurrency as a technology, not just looking at the price,” waiting for a sign of stability and start investing more aggressively,” he said, in an interview with Bloomberg, adding “the appetite for venture funds is through the roof.”
Just Can’t Get a Break
On the regulatory front, SEC Commissioner aka “Crypto Mom,” Hester Peirce has spoken out against regulating crypto more strictly, warning that doing so would discourage investors.
“I am concerned about trying to make it harder for people to do truly peer-to-peer transactions . . . I think regulation doesn’t all have to happen at government-level. You can have pretty effective self-regulation,” said Peirce when asked about SEC Chairman Gary Gensler’s comments on crypto exchanges.
Still, Bitcoin prices remain subdued, with $20,000 flagged as a potential key area for the cryptocurrency. The crypto asset has been in a down phase for a month now, following the exponential rally of 1,610% gains since March 2020 low as nothing goes up in a straight line.
“Bitcoin can’t get a break,” said Antoni Trenchev, managing partner and co-founder of Nexo, a crypto lender.
“Big picture, what we’re experiencing here is a tedious, drawn-out regulatory overhang which will continue to weigh on the Bitcoin price. Ultimately it’s good for the industry — and crypto needs the right sort of regulation — but for short-termism out there, it’s probably best to look away.”