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Bitcoin has dropped to around $95,000 per coin. More significantly, the Coinbase premium index has recorded a negative value for the first time since February.
This index compares the price of Bitcoin in US dollars on Coinbase with its price in Tether (USDT) on Binance. The current negative value indicates an increase in selling among US investors.
This trend is concerning for the entire crypto market, as historical data shows that negative values in the index have often been linked to short-term downward pressure on Bitcoin's price.
This development is concerning for the entire crypto market, as historically, a negative reading on this index has been associated with short-term downward pressure on Bitcoin's price.
As key macroeconomic reports approach, market participants are steering clear of high-risk positions. The Nasdaq is losing momentum, and Bitcoin remains within a limited trading range. The Coinbase Premium Index illustrates this change in sentiment.
A positive index reading usually suggests capital inflows from U.S. investors, while the current negative reading indicates that they are leaving the market in large numbers.
Bitcoin's growth potential in the current market cycle is facing skepticism. Unlike previous bullish phases, the current rally seems to lack dynamism. However, economist Alex Kruger remains confident that Bitcoin's supercycle theory is still valid despite the volatility.
Kruger noted that while Bitcoin's sideways movement may frustrate investors, the cryptocurrency has strong upside potential in the long run. He stated, "Bitcoin is stuck in a range, but in my opinion, it will eventually break out. The supercycle theory remains intact."
Nevertheless, he warned that not all crypto assets will benefit from this scenario. In contrast to earlier cycles, where growth was widespread across the market, investors now need to be more selective.
On Tuesday, February 11, cryptocurrency exchange-traded funds (ETFs) experienced a significant decline in assets. Bitcoin ETFs saw an outflow of $56.76 million in just one day, bringing the total outflow over two days to $179.72 million. In contrast, Ethereum-focused funds attracted inflows of $12.58 million.
The largest losses among Bitcoin ETFs were seen in Fidelity's FBTC, which lost $43.63 million, and Franklin's EZBC, which declined by $11.03 million. Conversely, BlackRock's IBIT reported a net inflow of $23.8 million, helping to mitigate some of the overall outflow.
These capital outflows indicate a shift in priorities among institutional investors, which is important given the current market volatility. If this trend continues, it could put additional downward pressure on Bitcoin's price.
Bitcoin continues to struggle, with its price experiencing a steady decline. After failing to break above $100,000, the cryptocurrency is now trading below $97,000. At the time of writing, Bitcoin is priced at $96,939, reflecting a 0.8% decrease from yesterday and a 10.9% drop from its peak in January.
One key factor impacting the market is the decrease in Bitcoin balances on over-the-counter (OTC) platforms. Analysts from CryptoQuant report that the amount of Bitcoin held on these platforms has fallen from 480,000 BTC to 146,000 BTC since September 2021.
OTC platforms are typically used by institutional investors to purchase large amounts of Bitcoin without causing significant price fluctuations. If this trend continues, large investors may be forced to conduct transactions directly on exchanges, which could lead to increased volatility.
Another factor contributing to market pressure is the condition of the mining sector. The Hash Ribbons indicator, which monitors Bitcoin mining activity, suggests that miners may be nearing capitulation. Historically, this indicator has been a reliable buy signal, but right now, it indicates potential challenges. If miners are compelled to sell their accumulated reserves, it could increase downward pressure on Bitcoin's price. However, previous instances of miner capitulation have often been followed by strong market rebounds.
Bitcoin is at a crossroads. On the one hand, we see declining OTC balances, cautious sentiment among U.S. investors, and rising volatility. On the other hand, the supercycle theory remains relevant.
In the coming weeks, Bitcoin may face even greater selling pressure. The key question is: Will large investors buy the dip, or will they continue reducing their positions?
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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