The cryptocurrency-focused analytics company Glassnode reported that the weakening of expectations for interest rate cuts in the US bond market and the pricing in of potential rate hikes have suppressed risk appetite in the cryptocurrency market.
Glassnode's analysis states that the Federal Reserve's interest rate decision is crucial for determining the market's direction. According to the analytics company, the yield on US Treasury bonds has surpassed the returns achievable from carry trade operations in the cryptocurrency market.
This situation has led investors to allocate new capital to cash and low-risk interest-bearing instruments rather than cryptocurrency assets. The sustained strength of the US dollar is also contributing to the weakening of marginal demand for the cryptocurrency market.
Glassnode noted that Bitcoin's price is trading below the most intense cost basis level on the chart. The company identified a level around $69,000 as the breakeven zone and significant resistance for short-term investors.
It was stated that for a stronger Bitcoin recovery, it is necessary to once again break through the $69,000 threshold of short-term investor cost basis with increased trading volume. Additionally, it was added that the resumption of active demand for spot Bitcoin ETFs will also be crucial for a recovery.
According to Glassnode, Bitcoin's current decline represents the shallowest bear market to date in terms of price decline depth. However, judging by the duration of previous market cycles, the current downturn does not yet appear to be over.
The report pointed out that inflows and outflows on cryptocurrency exchanges, spot trading volumes, and ETF demand have simultaneously slowed down significantly.
Spot market trading volumes have fallen to multi-year lows, and the number of sell orders has also decreased. However, a significant portion of investors hold buy orders at prices significantly below current levels.
Reportedly, Glassnode's market risk indicator, Vector, gave a 'risk reduction' signal. This prediction suggests that investors prefer to protect their capital rather than invest in risky assets.
The company also reported that investors reduced their defensive positions at the peak of the rally but returned to hedging within a week after prices weakened.
Glassnode stated that the current market structure is being defined more by macroeconomic factors such as monetary policy, bond yields, and dollar dynamics than by developments in the crypto sector.
According to the analysis, Bitcoin losing its established support range of $62,000 to $68,000, combined with a resumption of fund inflows to cryptocurrency exchanges during the same period, could negate the current recovery scenario.
Conversely, more favorable monetary policy, increased trading volumes, Bitcoin's recovery to the $69,000 level, and the resumption of spot ETF purchases can be considered the first signs of a recovery in the cryptocurrency market.
*This is not investment advice.
end-content
