The tumbling Bitcoin market is shaking out the weak hands, with BTC once again below $4,000. Currently trading at $3,729, Bitcoin is showing signs of “capitulation” as opposed to a lack of interest, according to industry insiders.
The world’s largest cryptocurrency is reaching its lowest levels since September 2017 with fear, uncertainty and doubt causing a widespread crypto sell-off. Despite industry insiders such as Tom Lee of Fundstrat and Anthony Pompliano of Morgan Creek Digital Assets assuring investors that Bitcoin’s fundamentals remain unchanged and that the emerging asset class can perform as a store of value to rival gold, prolonged selling pressure suggests that there may be a new sentiment at play that’s causing the downward spiral rather than a general lack of interest.
According to a report by the Financial Times, Chris Beauchamp, chief market analyst at trading platform IG, investors were “much less happy” to hold BTC at $4,000 than they were at $6,000. He reported seeing a 20% increase in Bitcoin short positions over the past week. “They’d rather take the money and run,” he said.
Bitcoin’s fall from the all-time high of $20,000 last December, the recent Bitcoin Cash fork and the lack of momentum that sparked the bull run last year are causing some traders to give up.
Says Max Boonen, founder of market maker B2C2,
“The way that the fork between bitcoin Cash and bitcoin SV was handled did not put the industry in the best light. It will certainly deter many participants from entering the market.”
“[Trading] volumes have been quite high in this move lower. That might be a sign of capitulation, rather than a mere lack of interest.”
Key concerns are the ongoing regulatory issues that have so far failed to produce a working framework for institutional investors in the US. Whether or not ICE’s new trading platform Bakkt or the approval of an SEC-regulated Bitcoin ETF would spur institutional investors to move into the crypto markets as anticipated, remain the keys signs the markets are looking for to affirm Bitcoin as a long-term solid asset class – bestowing a psychological certificate of confidence.
As investors wait for a rebound, a firm regulatory framework, along with the unequivocal approval of new Bitcoin instruments and trading options for Wall Street, are needed to propel Bitcoin to the next phase of integration and adoption. With existing investors running for the door, and newcomers remaining uncertain about when and how regulations will be able to dramatically reduce BTC price volatility, Bitcoin will likely continue to meet resistance at key levels of support.