Bitcoin’s decline following its rally revealed some hidden weaknesses that could not be easily identified before. Retail investors don’t seem to be as excited by the market, as evidenced by their run-up from $25,000 and subsequent run-down. Retail investors are still not seeing significant transaction volume, which indicates that low bullish sentiment was behind the market rally’s collapse.
Bitcoin Retail Volume Remains Low
Glassnode recently reported that the market’s weakness is being reflected in the low retail volumes. Long bullish phases are usually reacted by retail investors who tend to raise their transactions volumes in tandem. However, retail bitcoin investors did not move much in this bullish rally.
This chart displays a decrease from June to the date of the crash. But, this downtrend is a constant. Instead of increasing transaction volume as was expected, when prices were recovering, they reduced their volumes, dropping below $10,000 per month on average.
BTC retail interest continues to be muted in recovery. Source: Glassnode| Source: Glassnode
This report points out that there is an apparent weakness in the market due to the lack of volume and demand associated with the change in market sentiment. Given that market sentiment only drives the market so much, and supply is expected to continue to outstrip demand, this makes it easy for the digital asset to drop in price sooner than anticipated.
BTC Sell Pressure
In the past week, bitcoin prices have been under increasing selling pressure. This comes after the plunge in bitcoin price to $21,000. The crypto market sentiment has obviously taken a hit from the decline and has now fallen further into the fear territory on the Fear & Greed Index.
Source: BTCUSD on TradingView.com| Source: BTCUSD on TradingView.com
Current indicators indicate an 80% sell signal. BTC will lose $21,000 if it cannot keep the currency at $21,000 and then decline to $20,000 below. Importantly, the 20.711 area is the support zone. This means that current trends are barely holding on to a thread.
Glassnode notes also that market investors had been inclined to distribute their holdings at a higher-than-market average cost basis. The decline was due to this and a lack of demand for digital assets.
There are no indications that the market has reached a bottom. The market is unlikely to drop below $17,600. Following historical trends Bitcoin is likely to reach $12,000. At that point, demand will rise. A coinciding with the next half-century will set off the next bull market.
Capital.com's featured image. Chart by TradingView.com
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