Bitcoin (BTC-USD) traded within a tight 24-hour price range of $57,200-$58,200 on Thursday.
Chart indicators suggest that the cryptocurrency is in a precarious position that could lead to either further declines or stabilization and subsequent gradual appreciation.
Bitcoin recovered from lows of around $54,600 earlier in the week to trade at around $58,120.
The Bitcoin price has been falling steadily since early June from $71,000.
Several selling pressure factors have led to an increase in price volatility in recent weeks. Some traders fear that the supply of the digital asset in the market could potentially increase. This is due to confiscated bitcoins held by the German and American governments, according to this week’s CryptoQuant market report. Further selling pressure could come from the distribution of funds from the defunct bitcoin exchange Mt Gox.
Read more: Crypto Live Prices
Data suggests Bitcoin could fall further
On-chain analysis by CryptoQuant suggests that a major price correction or the start of a sustained bear market could be imminent as charts show the profit and loss index oscillating around its 365-day moving average.
Charts from the blockchain analytics firm show that previous breaks below the 365-day moving average preceded significant declines in Bitcoin in May and November 2021, when the digital asset fell by about 40% each time.
Arguments for a price recovery
According to analysts at CryptoQuant, long-term Bitcoin holders – addresses that have held the digital asset for 155 days or more – are seeing the fastest monthly rate since April 2023.
“Bitcoin whales have been increasing their holdings at a monthly growth rate of 6.3%, the fastest pace since April 2023, indicating increasing demand for Bitcoin,” CryptoQuant said in a market report on Wednesday.
Read more: Why the Bitcoin price is falling
The increase in demand from long-term holders is supporting the Bitcoin price, the report said.
Analysts noted that long-term holders made significant gains when prices exceeded $71,000 in early June, but they have since suffered some losses and are now more hesitant to sell.
“This could be an early sign of a bottom in Bitcoin price,” said CryptoQuant.
In addition, it may take longer for the Bitcoin price to initiate a new uptrend as the growth of stablecoin liquidity is not yet in full swing, the report said.
Lack of stablecoin liquidity
The market capitalization of USDT (USDT-USD), the world’s largest stablecoin by trading volume, is declining. This could delay or dampen the potential for a significant increase in the value of Bitcoin’s price, according to the CryptoQuant report.
“The Bitcoin price typically rises when the minting of USDT brings more liquidity into the crypto market, a condition that has not been met so far,” analysts noted.
High liquidity is important for markets because it ensures smooth transaction flow and stable prices, giving investors the ability to buy or sell assets without significant price fluctuations.
Download the Yahoo Finance app, available for Apple And Android.
