What’s the deal with bitcoin price?
It has been flapping around, range-bound for most of the last month. As of this writing, it is at $29,854.41, unchanged from yesterday. On a weekly basis, it is down by almost 4%.
There are no catalysts to further pump its price in a fast diminishing cohort of crypto traders. The Securities and Exchange Commission (SEC) has refrained from commenting on the prospects of BlackRock’s spot bitcoin ETF filing. On the macro front, positive inflation and labor data should have increased chances of a bitcoin rally because it translates to a ‘soft landing’ for the economy. But that hasn’t happened.
It is a measure of the illiquidity of crypto markets that Ripple’s XRP has surpassed bitcoin in trading volumes. According to the latest from research firm Kaiko, XRP accounted for 21% of the overall trading volume at crypto exchanges while BTC took a backseat at 20%. The XRP pump occurred because of an ambiguous court ruling that is being mischaracterized as a “partial win” by crypto enthusiasts.
What Happens Next?
Bitcoin price has moved sideways for long periods many times in the past. But the circumstances this time around have changed. Bitcoin’s biggest trading partner is now TrueUSD (TUSD), an unregulated stablecoin whose trading volumes are overwhelmingly at Binance, an unregulated exchange. Previously, stablecoin Tether was bitcoin’s main trading partner. While it is also unregulated, Tether’s trading volumes are spread across multiple exchanges and venues, meaning it was possible to arbitrage trades involving the cryptocurrency.
It will also take more than TUSD to bolster bitcoin price. The cryptocurrency ecosystem is operating in the summer doldrums of liquidity, according to research firm Kaiko.
The third quarter has typically been the lowest trading volume quarter, the firm writes. An investor exodus from crypto markets since last November should make it even lower this year.
Right now, it is most pronounced at Binance’s American subsidiary Binance.US. The $1 peg for Tether has been askew for most of the last month. Since Tether is the only exit route into fiat at Binance, this means that traders at the exchange are converting their crypto into the stablecoin and redeeming the stablecoin for US dollars.
According to data from The Block, the share of overall trading volumes involving US dollars in crypto has jumped to 13.21%, as of this writing, from 10.18% in March. The share of trading volumes for Tether has fallen from 68.97% to 60.98%. Tether is often used as a proxy for fiat as traders move their holdings between tokens.
An Aggressive Rally
On CoinDesk’s morning show Julius De Kempenaer, senior technical analyst at stockcharts.com, a bitcoin move from its current range will be a “significant break”. According to him, the longer that bitcoin price stays in the current range, the more supply of the cryptocurrency is being picked up buyers. Once that supply runs out, and if there is still demand, you could get a very aggressive rally, he said.
Considering declining demand among investors, an opposite move is likely and the aggressive rally translates to an aggressive crash.