Bitcoin Struggles to Break the $22K Level as Investors Settle With Profits
Cryptocurrencies are showing strong gains on Thursday, with Bitcoin and Ethereum up around 2%. Despite the gains, bitcoin is still struggling to break through the $22,000 mark. It has been stuck between $21,300 to $21,600 since it hit a low of $20,000 last week.
Investors Spending their Cost-basic
According to Glassnode, Bitcoin aSOPR continues to face heavy resistance at the break-even threshold of 1.0. “This suggests $BTC investors are taking profits during bear market rallies and are spending coins at their cost-basis to simply ‘get their money back.'”
The crypto market has experienced a rapid decline in returns over the past month. While the market was rising, cryptocurrencies were also returning double-digit gains. The investor sentiment in the space was also starting to improve.
However, the entire market immediately fell after bears rejected bitcoin at $25,000. Following sentiment decline, the digital assets that performed well during the previous period are now red.
Loss of Value for Crypto Indexes
During the beginning of August, the crypto market started to recover. All of the major indexes in the space began to see strong growth. The gains that the small and mid-cap indexes had made during this period were most notable. As expected, these assets had started to swing higher due to the increased risk appetite of investors.
However, the market started to turn negative as the month drew close. Due to the lack of interest in the proposed Ethereum Merge, the hype died down. The small cap index suffered the most losses last week. The former is at -85 and showing negative returns for the month. The mid and large cap index followed the same route with losses of 8%.
The only one of the three that could maintain a bit more of its value was bitcoin, albeit not a lot. In contrast to the 12% overall gains witnessed in the crypto market back in the middle of August, the pioneer digital asset saw losses of 7% over the same period.
Bearish Sentiments Could Continue
It is easy to see how the market is reacting to the current situation when one takes a look at it in August. Back then, investors started taking more risks as the prices recovered.
The recent dump has caused many investors to become less likely to take risks. That has also led to people running to cover their positions. Hence, traders are moving their assets out of volatile cryptocurrencies.
The increase in stablecoins stealing market share from other assets such as Ethereum was the same phenomenon seen in July. However, Bitcoin’s movement has been slower than before.
The current bearish sentiment will persist unless there is a dramatic improvement in market sentiment. Stablecoins will likely still succeed in these markets, as seen by the 0.77%, 0.50%, and 0.32% weekly increases in market share for USDT, USDC, and BUSD, respectively.
Will the Merge Change the Market Sentiment?
The Directional Movement Index (DMI) Index indicates that bulls control the market. However, a daily close below support at $1,700 would indicate that the bulls are in control of the situation.
The proposed Ethereum merge will directly impact the ecosystem and the cryptocurrency industry. With investors positioning themselves, the Ethereum price could experience higher demand, increasing the chance of a major move.
Ethereum price must move from the selling bottleneck near $2,000 into higher support to defend gains from the last several days. Bulls would open the way for a rally aiming for $3,000 with a break over the 100-day SMA at $2,189.
On the other side, if the price of Ethereum trades below the ascending channel and, consequently, the demand region around $1,700, it may reverse course and retest the $1,530 level of support before continuing its upward trend in advance of the Merge.
