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The expectations of rotational trade from altcoin exchanges continue to support Bitcoin’s short-term investment scenario.
The Bitcoin (BTC) market is split on how to view this week’s BTC price plunge, in which the pair lost more than 35% of its worth at one stage on Wednesday, plummeting to as low as $30,000 on Coinbase.
According to global media reports, the drop was caused by China reiterating its anti-crypto market position and Tesla abruptly discontinuing Bitcoin payments for its electric vehicles.
Nikolaos Panigirtzoglou, managing director for global market strategy at JP Morgan, further noted an ongoing decline in the capital that flows into publicly listed Bitcoin funds. He suspected a rotational investment setup, wherein institutional investors were winding up their positions in the Bitcoin futures market and reallocating the proceeds to build long positions in gold funds.
“It is not clear what is driving this shift,” Panigirtzoglou added.
“Perhaps institutional investors are fleeing Bitcoin as they see its previous two-quarter uptrend ending and thus seek the stability of traditional gold away from the rapid downshifting of digital gold.”
Nonetheless, he emphasised that Bitcoin’s momentum indicators stay optimistic. As a result, it is far too early to call the bull market over.
Bitcoin dominance awaits rebound
Lennard Neo, head of analysis at Stack Funds, presented a similar near-term upside setup, citing a possible rotational setup, albeit from altcoins to Bitcoin.
Lennard cited new directional developments in the Bitcoin industry as well as the Bitcoin Dominance Index’s supremacy against a large pool of alternative crypto currencies.
He observed that the nett crypto market capitalisation increased by approximately 40% as Bitcoin’s domination of altcoins fell from 73.5 percent to 40.5 percent.
This indicates that many buyers stayed invested in cryptocurrency markets, mostly moving their Bitcoin profits to altcoins that seemed appealing in the short term. Neo went on to say that Ether’s 180 percent year-to-date increase late last month resulted from the same Bitcoin-to-altcoin setup.
But now, money would want to return to the Bitcoin economy, according to the former Bloomberg analyst, who added:
“We believe the rotational playbook has reversed as dark clouds loom over the markets. We are expecting investors to cycle back into Bitcoin as uncertainties increases as the markets undergo another reset. Hence, a bounce in Bitcoin dominance should occur, further supporting Bitcoin’s price in the short term.”
Ben Miller, a veteran hedge fund trader and businessman, has also come out in favour of Bitcoin’s bullish bias, calling the latest downside downturn a “routine pullback.”
“If I liked something at higher prices, it is a safe bet I will like it even more at lower prices,” said the former Legg Mason Capital Management chief investment officer, citing similar Bitcoin price drops during the mega-bull market of 2017.
However, bearish woes continue to outweigh bullish forecasts, especially as Guggenheim chief investment officer Scott Minerd, who predicted a $600,000 price tag for Bitcoin, reversed his position and referred to the cryptocurrency as “Tulipmania.”
Meanwhile, UBS Global Wealth Management’s chief investment officer, Mark Haefele, described Bitcoin as an untrustworthy store of value due to its high price volatility.
According to Julius de Kempenaer, a senior technical analyst at Stockcharts.com, Bitcoin’s latest price drop has dimmed its safe-haven view.
At the time of writing, Bitcoin was trading above $40,000, up more than 30% from its session low of $30,000.