Factors for another Bitcoin rally: ARK Invest

Factors for another Bitcoin rally: ARK Invest

The Blockchain Industry: Factors That Could Lead to Another Bitcoin Rally

In a recent report titled “The Bitcoin Monthly: July 2023,” ARK Invest’s on-chain researcher, David Puell, provides an in-depth analysis of Bitcoin’s current situation and the potential for another rally in the cryptocurrency market. This report delves into various factors, including market volatility, hash rate, selling pressure, macroeconomic influences, and regulatory concerns.

Market Volatility: The Calm Before the Storm

Puell highlights Bitcoin’s tepid 90-day volatility, which parallels the levels observed in the 2017 bull run. This prolonged low volatility often represents the “calm before the storm.” Puell speculates that a significant price movement is likely to happen soon, although it remains uncertain whether it will be a breakout or a breakdown.

To add to the optimism, the decrease in the hash rate on the Bitcoin blockchain provides an optimistic signal. This decrease could indicate oversold conditions, implying that Bitcoin is currently trading below its actual worth. Considering that Bitcoin has been undervalued for a prolonged period, this trend could potentially lead to an upward price reversal.

Selling Pressure Reduction and Increased Hodling

Another positive factor highlighted in the report is the increase in “liveliness” as selling pressure has reduced, and more holders are choosing to ‘HODL’ their Bitcoin. In July, liveliness fell below 60%, representing the lowest selling pressure since Q4 of 2020. This reduction in selling pressure is often seen as a precursor to a bullish market sentiment.

Furthermore, the short-term holders’ profit/loss ratio aligns with historical trend reversals, indicating that a breakout is more likely to occur. This ratio has correlation with both local bottoms during primary bull markets and local tops during bear market environments, according to the report.

Macro Factors: The Federal Reserve’s Impact

The actions of the Federal Reserve have proven to be a significant macro factor influencing Bitcoin and the broader cryptocurrency market. Puell suggests that the Fed’s decisions could significantly impact Bitcoin’s performance and the economy as a whole. If the Federal Reserve manages to slow down CPI (consumer price index) inflation, Bitcoin’s appeal as a non-inflationary asset could surge.

The ongoing legal tussle between Binance and the United States Securities and Exchange Commission (SEC) could also affect Bitcoin’s performance. The SEC has filed a lawsuit against Binance for trading unregistered securities and other alleged violations. Binance’s BNB token plays a crucial role in providing liquidity for other cryptocurrencies, including Bitcoin. If sentiments shift in favor of the SEC and the Department of Justice (DOJ), it could trigger a “bank run,” causing BNB’s price to plummet, which would likely have a domino effect on the entire crypto market.

Resistance Level at $29,450 – The Key to Bitcoin’s Outlook

While historical trends indicate a bullish trajectory for Bitcoin’s price, certain macroeconomic forces and regulatory concerns may impact its journey. Market observers believe that if Bitcoin manages to breach the resistance level at $29,450, it could shape its future outlook. As the cryptocurrency market continues to experience a downward trend, surpassing this resistance level could lead to a sustained breakout or further consolidation.

BTC struggles to hold $29,000 support

In summary, various factors are at play within the blockchain industry that could contribute to another potential Bitcoin rally. These factors include Bitcoin’s market volatility, decreased selling pressure, increased hodling, macroeconomic influences such as the Federal Reserve’s actions, and regulatory concerns surrounding the legal battle involving Binance. Observing these dynamics and understanding their potential impact on the crypto market could help investors gauge Bitcoin’s future performance and make informed decisions.