Markets
The market’s bullish momentum is cooling!
Thu 23 May 2024 ▪ 5 minute read ▪ by Evans S.
The dizzying rise of cryptocurrencies has often left investors stunned, who are always hoping for further profits. However, the current trend shows signs of slowing, raising questions about the future of the market. Is this a necessary pause or the beginning of a turning point?
A cryptocurrency market looking for relief
The recent Glassnode report highlights an unavoidable reality: demand for the primary cryptocurrency has slowed significantly.
When examining the “Realized Cap,” an on-chain capitalization model for BTC, it becomes apparent that the value of each circulating coin is calculated based on the spot price at which it was last moved.
This method allows you to determine your current cost base and monitor whether capital is flowing into or out of the cryptocurrency.
During the latest all-time high, the realized limit of the flagship cryptocurrency has seen rapid growth, indicating a massive inflow of capital.
Today the trajectory is less steep and, although new peaks are being reached, the increase is decidedly more modest.
“Currently, the pace at which new capital flows into the Bitcoin network has slowed significantly from its peak as the market digests the recently distributed supply,” he says the report.
This deceleration in demand raises doubts about the market’s ability to maintain its dynamism.
Signs of a market in transition
Another revealing indicator of the current situation is the measurement of the net profit realized by investors.
When they sell at a profit, the realized limit increases, indicating demand for coins at a higher price. Conversely, when losses are realized, the measure decreases, signaling a reduction in the total investment in the cryptocurrency.
The cryptocurrency market absorbed a large amount of profits during the formation of the latest all-time high. Since then, the indicator has cooled, highlighting a decline in demand. This situation could indicate that investors are taking a more cautious approach, waiting for clearer signals before reinjecting capital.
The “escape velocity” theory.
Despite this slowdown, some analysts see positive signs for the future. Giacomo Checkcryptocurrency analyst, recently used the term “escape velocity” to describe what Bitcoin might do once it hits the $73,000 price point.
In astrophysics, escape velocity is the minimum speed necessary for an object to escape the gravitational field of a celestial body without further propulsion. For Bitcoin, reaching this price could mark the beginning of an acceleration to new heights.
Check points out that the transition from excitement to euphoria can happen quickly, but the cryptocurrency market has not yet reached this point of “euphoric escape velocity.”
“We are still in a regular, stable, enthusiastic, but above all NOT euphoric bullish phase,” he explains. This stability could form a solid basis for future price increases, although resistance is to be expected in the short term.
Towards a decisive turning point for cryptocurrencies?
The current dynamics of the cryptocurrency market, particularly bitcoin, show signs of slowing down after a period of intense growth. This slowdown may represent a much-needed pause, allowing the market to digest recent gains and prepare for a new phase of growth.
However, caution is advised. Indicators show falling demand, and while some analysts remain optimistic about a quick recovery, the reality may be more complex.
The concept of “escape velocity” mentioned by Check offers hope, but investors need to remain vigilant of potential near-term resistance.
The cryptocurrency market is at a crossroads. Whether this is a temporary pause or the beginning of a decisive turning point, only time and future trends will tell. Investors will need to navigate with caution and discernment to seize opportunities while minimizing risks the enthusiasm wanes.
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Evans S.
Fascinated by bitcoin since 2017, Evariste has not stopped researching on the topic. If his first interest is in trading, the wise man is desperate to discover all the advanced cryptocurrency centers. As an editor, he aspires to consistently provide high-quality work that reflects the state of the industry as a whole.
DISCLAIMER
The views, thoughts and opinions expressed in this article are solely those of the author and should not be relied upon as investment advice. Do your research before making any investment decisions.