Cryptocurrency proponents anticipated Bitcoin to reclaim its fort above $40,000. However, the crypto-asset has been facing quite a stiff resistance at this level. Despite many in the community, counting for the token to bounce back, it has now entered a consolidation phase preceding a few major dips.
So what is holding back the uptrend?
Bitcoin Under Institutional Exhaustion?
Reportedly, the momentum of flows into the $20 billion Grayscale Bitcoin Trust [GBTC] have topped up when four-week rolling averages are taken into consideration. Over the past two weeks, the fund took a plunge of more than 20% through the 22nd of January, which coincided with the significant double-digit pullback in BTC’s price.
The JPMorgan strategists led by Nikolaos Panigirtzoglou stated,
“At the moment, the institutional flow impulse behind the Grayscale Bitcoin Trust is not strong enough for Bitcoin to break out above $40,000.”
The strategists also went on to add that “risk is that momentum traders will continue to unwind BTC futures positions.” Despite the growing uncertainty, it can be safely said that Bitcoin’s latest rally is in no way similar to the 2017 mania that preceded a massive collapse.
Furthermore, data compiled by the crypto-analytics platform, Skew, revealed that the coin’s realized volatility has hit levels as high as March 2020. So what does this mean?
During bull runs such as this, price fluctuations involved with BTC are more normal. This is due to the fact that market participants often tend to cash out at different points. Hence, greater volatility in the crypto-asset’s value essentially means more the extent of the deviation from its average price something that is to be expected during the bull run.
It is also important to note that overall the volatility of Bitcoin has gone down significantly while its price and market cap risen over time. If this trend continues, it can be a much-needed respite for the investors who witnessed massive FUDs and selling spark erratic price movements.
Despite the cooling off institutional momentum, Raoul Pal, founder of Real Vision, predicted
“Feels like BTC is getting ready to climb the wall of FUD fear. Positive seasonality and a nice wedge give it a good chance to hit $50k by March.”