Why Experts cautioned of ‘institutional fatigue’ with Bitcoin trapped at $32K

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The Coinbase premium has returned, but why is Bitcoin’s price only struggling to remain over $32,000?

The price of Bitcoin (BTC) stabilized in the last two days after slipping to as low as $28,850. After a fast recovery, though, BTC was unable to push through strong resistance at $33,000 on Jan. 23, pulling down below $32,000 at the time of publishing.

BTC/USD 1-hour price chart (Coinbase). Source: TradingView.com

Coinbase premium returning is bullish, but what now?

Earlier, as the price of Bitcoin began to slip below $32,000, BTC traded even lower on Coinbase than on Binance.

The lack of premiums on Coinbase was troubling for two main reasons. Next, Bitcoin inevitably trades higher on Coinbase as a consequence of Tether’s lower premium.

Second, as Coinbase sees a cheaper price than most exchanges, it shows that there is strong sales demand in the U.S. industry.

As the selling pressure on Bitcoin begins to rise in the U.S. economy, the price of BTC is feeling steeply within a brief span of time.

BTC/USD (white) vs. Coinbase premium Index (blue). Source: CryptoQuant

Yet, almost immediately after the BTC bounced back from $30,000, the Coinbase premium reappeared. At the time of publication, BTC is around $40 higher on Coinbase than on Binance.

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The re-emergence of the Coinbase premium after nearly 12 hours is a hopeful indication of a possible pattern turnaround.

Signs of “institutional exhaustion”

But in the short term, though, everybody is far from bullish. Analysts at QCP Capital, an Asian trading team, see some symptoms of “institutional exhaustion.”

Considering that the biggest story surrounding the latest one was the institutional demand for Bitcoin from the US, the recovery could be in trouble if the institutional hunger for BTC slows down. They were saying:

“Signs of institutional exhaustion: We’ve done a timezone analysis which breaks down BTC moves into Asia hours vs. US hours (12 hours each). Since March last year, the clear pattern has been relentless US buying while Asian whales and miners have been on the offer.”

Bitcoin loses strength in U.S. period. Source: QCP Capital

The traders argued that the power of the U.S. trading session has lost steam for the first time.

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In reality, much of the BTC’s selling pressure has come from Asia over the past week. This is a key change in investor sentiment. They also added:

“However after the BTC top 2 weeks ago, the strength in US hours has lost momentum for the first time. This is a clear sign of exhaustion in demand from the US institutions and corporates who have been the primary drivers of this bull run.”

What comes next for Bitcoin?

Bitcoin is at risk of a remedial period during the first quarter of 2021 if the institutional market for BTC is limited.

Various institution-focused channels and vehicles, such as Grayscale, are also seeing significant inflows, which are reflective of high institutional demand. At the same time, MicroStrategy maintains its program of buying bitcoin on each dip with the new purchase on Friday totalling $10 million.

“Today, $31,000 was a pocket of strong support, so at least not everyone is selling,” said Chad Steinglass, Head of Business at Crosstower, a digital asset capital management company.

“We’ll have to wait and see if that wall remains, or if institutions continue to accumulate. If they do, it’s likely that the trend will re-establish itself and continue. If they move to the sidelines waiting for more regulatory guidance, then their lack of buy flows will be acutely felt.”

At the same time, the possibility of a larger downturn persists if the U.S. market continues to see an overall decrease in the demand for BTC accumulation, particularly if the dollar continues to rebound in 2021.

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