Bitcoin is still unable to break above or below its current range. Yesterday, BTC’s price was seeing a trading session in the green until a surge in negative news contributed to an increase in selling pressure.
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Traditional markets also tumbled and added to the downside price action as Bitcoin approached a major area of resistance at $32,000. At the time of writing, Bitcoin (BTC) trades at $29,800 with a 6% loss in the last 24-hours.
Trading desk QCP Capital published a market update highlighting the rise in Bitcoin dominance as altcoins, such as Ethereum, continue to underperform. This metric is used to measure the percentage of the total crypto market capitalization comprised of BTC alone and currently stands at 47%.
As seen below, the last time this metric was at its current levels was in November 2021 when the market took a final move to the upside before a major crash on December 3 that year. After that, Bitcoin dominance trended to the downside and moved sideways until mid-May 2022.
If the upside trend in Bitcoin dominance continues, the altcoin market could experience more pain as BTC’s price remains rangebound. However, the short-term seems ready for some relief.
QCP Capital noted an increase in the number of short positions across the market. The trading desk said the following in its report:
If this an indication of overall market positioning (i.e. market is directionally short), spot prices might have formed a base here and we could see more spot upside in the short-term.
In a separate report, QCP Capital also noted BTC and the crypto market’s capacity to remain “robust” despite the “massive wipe-out” and general selling across the global market. The firm believes this is a “mark of maturity for crypto as a trading and investment asset class”.
Bitcoin In The Short Term, The Road To $34K
In the same report, the trading desk highlighted what could be the biggest headwind for Bitcoin and the crypto market in 2022. The nascent asset class saw unprecedented growth from 2019 to 2021 on the back of the U.S. expanding its money supply.
As QCP Capital said, the U.S. money supply has gone from expanding to contracting. As the chart below shows, the U.S. money supply recorded its firm monthly contraction since 2011 and hints at more pain for Bitcoin and other risk-on assets. The trading desk added:
This draining of liquidity will only be exacerbated by the upcoming QT balance sheet unwind as well, beginning 1 June. We expect these factors to weigh on crypto prices.
On the short-term horizon for Bitcoin, a pseudonym trader believes there are good conditions for a rally to $34,000. The number one crypto by market cap is signaling oversold on certain metrics and was able to maintain to remain rangebound on key indicators.
#Bitcoin– OBV still chopping, good sign we didn't break the chop. Just a little correction to an over inflated pump. #Stock futures caused the sell off, and they'll save it. pic.twitter.com/1tBbs6Qrkc
— IncomeSharks (@IncomeSharks) June 7, 2022