Market update

Cointree Crypto Market Update - July 21st 2021

Market report for traders

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Market Recap

Are institutions preparing to buy bitcoin?

Following more than AU$1.3 billion worth of shares being unlocked from the Grayscale Bitcoin Trust (GBTC), bitcoin’s price has dropped to levels not seen since earlier this year.

The bears claim that institutional demand remains weak and will push the price lower. Looking at the Purpose Bitcoin ETF, one of the easiest ways for institutions to gain exposure to bitcoin, we can see a slowdown in net inflows. This is indeed a bearish signal, compounded by the fact that GBTC shares have been trading at a discount of 11-15% over the past week.

Are the bears celebrating too early? A bounce could be just around the corner as this lack of institutional demand may be short-lived.

Firstly, there will soon be no more GBTC shares to be unlocked, meaning that everyone still holding GBTC is more likely to be long-term investors rather than short-term traders.

Secondly, a recent survey has revealed that the majority of institutional investors expect to buy digital assets in the near future. While the Rothschild Investment Corp has increased its bitcoin exposure by 300% since April, others may be looking to buy at even lower prices or waiting for confirmation of the next bull run.

Finally, Grayscale is reportedly entering its “final stages” in discussions with regulators as they plan to launch a Bitcoin ETF, making it even easier for major US institutions to invest in bitcoin. That’s not to mention that the second largest bank in America, Bank of America, is launching bitcoin futures.

Meanwhile, the number of bitcoin addresses linked to accumulation has increased by 20%. Those addresses now include miners who, after the mining crackdown in China, are now accumulating more than 3,300 bitcoin per month.

Regardless of whether institutions are preparing to buy, overall sentiment remains divided and we can expect further volatility through this accumulation phase.

Technician's Take

Bitcoin continues its accumulation phase

While bitcoin (BTC) has been ranging between AU$41K and AU$53k for a while now, it looks like the bears have started taking hold and have pushed BTC to AU$40K. Any drop below AU$38K could see a rapid descent to the AU$26K to AU$31K range.

What’s making the prices dip? There’s evidence that people are moving their assets from BTC to ETH, as well as stable coins such as USDT. While this may seem worrying at first glance, we must consider that investors are simply moving their positions within the cryptocurrency domain—not turning their crypto back into FIAT.

This is actually a very promising sign and is expected to happen in a rational market. While irrational markets can see massive gains or losses, a rational market is a secure place to store your investment over the long term. With the correct risk management strategies in place, you can have an effective and profitable cryptocurrency investment portfolio.

On the technical side of things, we’re definitely seeing confirmation of a bearish move with a slow descent below the support of AU$41K. The Moving Average Convergence Divergence (MACD) has crossed into bearish territory and RSI is pushing into oversold.

My personal position hasn’t really changed from last week, I’ll keep watching for any surges in volume. Whether that is on the buy or sell side is yet to be determined but could be a great indicator of future direction for BTC. Given the current action and given we’ve got a good level of support it would take more sell pressure to break out of the bottom of the range than it would take buy pressure to break out of the top.

Beginner's Recap

  • Bitcoin (BTC) is entering bearish territory with a move below support of AU$41K
  • Watch the AU$38K level, if it breaks that we might see a quick retrace to the previous AU$26K support and AU$31K resistance zone
  • Moving Average Convergence Divergence (MACD) made a bearish crossover
  • RSI moving towards oversold

Disclaimer: Information provided is for educational purposes and does not constitute financial product advice. You should obtain independent advice from an Australian financial services licensee before making any financial decisions.

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