A recent report from ARK Invest suggests that Bitcoin (BTC) investors are in a precarious position as the percentage of Bitcoin supply in profit has fallen by 14 percentage points. This decline in profit has forced short-term Bitcoin investors to capitulate in August.
Bitcoin’s price action indicates a significant bearish move as it fell below its 200-week moving average for the first time since June 2023. The 200-WMA is typically a key support level during major downtrends, and ARK Invest believes that future bearish catalysts could potentially take the price of Bitcoin as low as $20,300, where its realized price currently resides.
However, despite the gloomy short-term outlook, there is a more optimistic view that dips below realized price and long-term moving averages present cyclical buying opportunities. Historical data shows that investors who accumulated Bitcoin during similar dips in 2019, 2020, and early 2022 ended up making significant profits within the following six months.
Analyst Ben Lilly also points out a similar occurrence within the Bitcoin dominance metric, suggesting that “Bitcoin’s about to take the driver’s seat again.” Comparing market participant sentiment from 2018-2019 to the current market sentiment, Lilly believes that current price action resembles the pre-reversal period in 2019 when sentiment was low and nobody cared about Bitcoin or crypto.
Stablecoin marketcap data reflects the absence of bullish investor sentiment, as the 90-day supply of aggregate stablecoins has dropped by more than 20% from $162 billion in March 2022 to $120 billion currently. This decline in market liquidity and investors’ confidence in engaging with Bitcoin and altcoins indicates a lack of optimism in the market.
The potential approval of spot Bitcoin ETFs has been a topic of interest among retail and institutional investors. Until one is approved or the narrative of the upcoming Bitcoin halving takes precedence, the market dynamics described above are likely to persist.
It is important to note that this article does not provide investment advice or recommendations. Investors should conduct their own research and analysis before making any investment decisions. Every investment and trading move involves risk.