Bitcoin has been trading within a narrow range of $29,900 to $31,160 for the past 18 days, leaving investors wondering about the absence of a clear trend. Despite experiencing a significant rally in June, which led to its highest price level in over a year, Bitcoin has struggled to maintain prices above $31,000. Additionally, both on-chain and derivatives data do not support a bullish outlook, causing frustration among traders who were expecting further gains. This article will delve into the reasons behind this lack of bullish momentum and explore key indicators that suggest a stagnant market.
The current price situation is particularly concerning due to the high expectations that emerged after BlackRock, the world’s largest fund manager, filed for a Bitcoin exchange-traded fund (ETF) on June 16. Some analysts even predicted a Bitcoin price of $100,000 by the end of the year. However, these expectations have not materialized, leaving traders disappointed and hesitant to take positions at the current price levels.
To gain insights into the network’s usage and activity, it is essential to analyze blockchain data beyond just trading and exchange flows. The number of active users and addresses is a crucial factor in evaluating demand. Unfortunately, Bitcoin’s seven-day active addresses have failed to surpass 1 million, remaining at the same levels as three months ago. Moreover, the recent peak in April 2023 was 16% lower than the all-time high in January 2021. This indicates a stagnation in the number of active users on the Bitcoin network.
When assessing the demand from institutional investors, it is necessary to look at the network’s address count with a minimum of 100 Bitcoin (worth over $3 million at current prices). Upon closer examination, it becomes evident that the number of addresses in this category has remained unchanged for the past few months at 15,900. This suggests that there has been no increase in the number of whales accumulating Bitcoin during this period. Consequently, on-chain metrics indicate that the ETF launch has not yet triggered a substantial bullish momentum.
Bitcoin derivatives metrics can provide valuable insights into the demand for leverage from professional traders. In neutral markets, Bitcoin quarterly futures contracts typically trade at a 5 to 10% annualized premium, known as contango. The Bitcoin futures premium crossed the neutral 5% threshold on June 26, just five days after breaching the $30,000 support level. It took investors a full 18 months to become bullish using leveraged long positions, reaching the highest price point since June 2022. However, this also raises concerns about potential liquidations and panic selling if the Bitcoin price experiences a sudden 8% drop.
Examining the options markets is also informative, particularly the 25% delta skew, which indicates the overcharging of upside or downside protection by arbitrage desks and market makers. A skew above 7% suggests anticipating a Bitcoin price drop, while a negative 7% skew indicates a phase of excitement. Unfortunately, the 25% delta skew failed to sustain levels below the neutral threshold for more than four days. The only period of moderate bullishness, as indicated by the options pricing indicator, was from July 1 to July 5. The current balanced demand between call and protective put options reflects a lack of confidence from professional traders.
Despite the optimism surrounding the potential approval of a Bitcoin ETF and the recent price rally above $30,000, both on-chain and derivatives data fail to support a sustained bullish momentum in the Bitcoin market. The stagnation in the number of active users and the lack of increase in whales accumulating Bitcoin suggests a lack of demand. Furthermore, derivatives metrics indicate a cautious approach from professional traders, dampening confidence in further price gains. As a result, investors and traders must carefully assess the market conditions and manage their expectations regarding Bitcoin’s future performance.
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