After a promising start to 2020, the collective digital asset industry has been facing massive bearish pressure since 14th February. The correction period continued to take its toll on the market and over the past week, drastic changes have surfaced.
According to CoinMarketCap, Major assets like Bitcoin, Ethereum and XRP are currently exhibiting negative returns of 12.91, 18.20 and 17.05 percent over the past seven days. Other assets haven’t been able to escape the bearish stronghold as well, and data suggested that the gains acquired during the course of February by most crypto assets were completely drained out at press time.
Bitcoin’s February and sentiment reversal
Bitcoin’s valuation faced a favorable spike of 31.41 percent in January as the price stretched from $7237.35 to $9510.84. The trend continued in February as well, as BTC breached past $10,000, and reached a monthly high of $10,495 on 12th February.
The trend drastically shifted thereon, and the price took a massive tumble. Over the past two weeks, BTC has registered a depreciation of 19.06 percent as its valuation dropped from $10,500 to under $8600 at press time.
Overall Bitcoin witnessed a negative return of 8.14 percent in February. Such bearish pressure triggered the reversal of various bullish metrics over last week.
Bitcoin’s Fear and Greed index were largely bullish during the start of February but over the past week, the index pictured a ‘Fear’ sentiment. The ratings recorded by the metric is 39 at press time. In January, the metric indicated an average index of 59, exhibiting a ‘Greed’ sentiment.
Although a ‘fear’ sentiment for Bitcoin may facilitate a buying opportunity for the traders, the continuation of a downwards spiral is not out of the equation.
Bitcoin’s Institutional Demand on a Decline
Bitcoin’s depreciating price affected institutional interest over the course of February as well, with CME losing more than 40 percent in terms of open interest.
The Aggregated Open Interest for CME Bitcoin futures registered a yearly high of $338 million on 14th February but over the past 10 days, it slumped down to $206 million as observed on 29th February. It is important to note that Open Interest is still above the average exhibited between October and December of last year, but such a significant slump raises serious concerns.
Bitcoin’s Volatility opens the possibility for a trend reversal
Bitcoin Volatility has registered a tremendous hike over the past week after picturing a drop for most parts of the bullish rally in January. Since the 14th, the volatility levels have steadily increased from 2.24 percent to a monthly high of 2.98 percent on 27th February. At press time, the levels had dropped down to 2.78 percent but it is still considerably high.
Volatility is not a direct indicator of a bullish or bearish trend but a spike suggested that Bitcoin’s price is primed for more turbulence in the coming weeks. Many speculated that a correction period following the rally in January is a healthy sign but with the current market sentiment in play, the exhaustion of bullish momentum is a likely possibility.
