In a report released on August 4, ARK Invest’s on-chain researcher David Puell reveals factors that could lead to another Bitcoin rally. The report, titled “The Bitcoin Monthly: July 2023,” provides an in-depth analysis and distinguishes between Bitcoin’s current situation and what the future holds for the largest cryptocurrency by market cap.
Some Positives For Bitcoin
Puell highlights how Bitcoin’s tepid 90-day volatility shares similarities with 2017 levels. According to the report, this prolonged low volatility usually represents the ‘calm before the storm,’ with Puell speculating that a significant price movement will likely happen soon. However, whether it will be a breakout or a breakdown remains uncertain.
There is cause for optimism, though, as the decrease in hash rate on the blockchain provides an optimistic signal. The decrease could signify oversold conditions – whereby Bitcoin is currently trading below its actual worth, and considering that it has traded at an undervalued price for a long while now, we could see an upward trend, which would signify a price reversal.
Additionally, there has been an increase in “liveliness” as selling pressure has reduced and more holders are choosing to ‘HODL.’ The report states that liveliness fell below 60% in July, the lowest selling pressure since Q4 of 2020.
The short-term holders’ profit/loss ratio also coincides with historical trend reversals, signifying that a breakout is more likely to occur.
The report states:
This breakeven level correlates both with local bottoms during primary bull markets and with local tops during bear market environments.
Meanwhile, the Federal Reserve’s continued hike rate has been known to be a macro factor on Bitcoin and the crypto market. Puell believes that the Fed’s actions could significantly impact Bitcoin’s performance and the economy as a whole. A potential slowdown in CPI (consumer product index) inflation could see a surge in Bitcoin’s appeal as a non-inflammatory asset.
Binance Could Have A Domino Effect On BTC
The United States Securities and Exchange Commission (BTC) filed a lawsuit against Binance for trading unregistered securities, amongst other allegations. This ongoing legal tussle could affect Bitcoin’s performance and the crypto market.
According to the report, Binance’s BNB token ensures stability in the crypto market by providing significant liquidity for other cryptocurrencies, including Bitcoin. If sentiments begin to tilt in favor of the SEC and DOJ, it could trigger a “bank run,” which would see BNB’s price plummet, causing a domino effect on the crypto market.
While historical trends signify a bullish trajectory for Bitcoin’s price, the token might be marred by macroeconomic forces and regulatory concerns. It is believed that Bitcoin breaching the resistance level at $29,450 could shape its future outlook.
As Bitcoin continues to witness a downward trajectory, that resistance level might be the key to a sustained breakout or further consolidation.