In the traditional financial market, gold and the S&P 500 are hitting new highs, while cryptocurrencies, led by Bitcoin, are performing mediocrely, down more than 21% from their peak in March. The investment market seems to be turning to more stable investment targets, while safe-haven assets such as Bitcoin seem to have been neglected.
In the absence of massive new market capital injection, Bitcoin's price trend shows a clear downward trend. This not only poses a challenge to Bitcoin's short-term prospects, but also questions its long-term status as a hedge against inflation.
This article will analyze the performance of Bitcoin in the current market environment, reveal the market dynamics of Bitcoin, and explore its possible future trends. In this financial feast, is Bitcoin's safe-haven status still solid?
Bitcoin underperforms traditional financial representatives
Recently, Bitcoin has lagged behind gold and the S&P 500, with its price falling 21% from its all-time high in March and currently trading around $58,000. At the same time, gold prices have reached a new all-time high of around $2,565, the S&P 500 has also broken through $5,560, and silver is also on the verge of breaking its previous high. This trend is related to the market reaction after the release of the US CPI report, and is similar to the 36% drop experienced by Bitcoin in May 2021.
CryptoQuant's analysis points out that investors are currently more inclined to choose lower-risk assets, which indicates that the market may be in a risk-averse environment. Because there is a negative correlation between Bitcoin and gold, that is, when the price of gold rises, the price of Bitcoin tends to fall, which usually means that investors prefer traditional safe-haven assets such as gold.
In addition, Bitcoin's bull/bear cycle indicator also shows that the market may be turning bearish. This indicator measures the market state by comparing the difference between the profit and loss index and the 365-day moving average. At present, the indicator has fallen below zero, suggesting that Bitcoin may face further downward pressure.
Bitcoin price is under pressure, with a clear bearish trend
Meanwhile, another indicator supporting this bearish bias is the 365-day market value to realized value (MVRV) ratio, which measures the relationship between the price of Bitcoin and the average purchase price of its holders. A high MVRV ratio usually means that the market is overheated, while a low ratio may indicate that the market is undervalued. Currently, once the 365-day MVRV ratio of Bitcoin falls into negative values, it may indicate a continuation of the bearish trend.
According to data from Santiment, the current 365-day MVRV ratio of Bitcoin is already below 1%, which may indicate that the market's valuation of Bitcoin is declining. Analysts believe that if this ratio continues to decline and falls below the critical threshold, the price of Bitcoin may fall further to $45,000, marking a shift from a bull market cycle to a bear market cycle.
In addition, the spending output profit rate (SOPR) of long-term holders (LTH) has also been declining since July, which generally indicates that holders are selling Bitcoin at a lower profit. This trend may suppress the market demand for Bitcoin, thereby affecting its price momentum.
New capital injection is urgently needed to avoid downside risks
Still, there is a chance that Bitcoin’s price could rebound to new all-time highs if market sentiment changes, especially if investors in traditional assets begin to move funds into Bitcoin and other cryptocurrencies.
Santiment also said that Bitcoin may need more market skepticism to push its price above its all-time high in March. In short, Bitcoin's market outlook will be affected by a variety of factors, including investor sentiment, market valuation, and capital inflows.
Conclusion:
Although Bitcoin has been overshadowed by the strong performance of traditional financial markets recently and may face further downward pressure in the short term, there is still hope for Bitcoin's future. If there are positive changes in market sentiment and capital flows, Bitcoin may still be able to resume its upward momentum.
Therefore, when considering investing in Bitcoin, investors should pay close attention to market dynamics, remain cautious, and be prepared to deal with market uncertainties.
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