GB Market Commentary 25/07/2022
by Marcus Sotiriou
As Bitcoin drops below $22,000 this morning, on-chain metrics are showing conflicting signs. Data from Glassnode shows that Bitcoin’s net unrealised profit/loss chart is in the ‘capitulation’ zone. When we reached this zone in January 2019 and March 2020, it has represented exceptional buying opportunities, as sellers become exhausted. This suggests that we are in a buy zone relative to historical price action.
However, data analytics platform ChainExposed shows some opposing signs - Bitcoin whales (wallets with 1,000-10,000) are currently distributing (selling) their Bitcoin. When we saw this happen last year, it preceded the downtrend of Summer 2021.
This is congruent with news of funds like Three Arrows Capital and institutions like Tesla selling during this downturn – these companies who you’d typically deem as ‘smart money’ are being forced to sell to manage risk and raise cash in this rising interest rates environment, where many institutions have alluded to trying to prepare for a recession. Companies who have healthy balance sheets to ride the storm are accumulating, like Binance, but I think the convincing data surrounding ‘smart money’ buying isn’t there yet. I think this data will begin to show when inflation starts to inflect down and hence the Federal Reserve slows tightening measures.
Despite a lack of institutional buyers currently, according to Sky News Barclays is planning to invest a "relatively modest sum in the millions of dollars" in crypto financial services firm Copper. The funding round is set to finalise in the next few days.
This does not come as a surprise as the bank invested in institutional crypto services provider Elwood Technologies in May, joining Goldman Sachs and Mike Novogratz's Galaxy Digital. This shows that although crypto faces significant hurdles due to the macro environment and a lack of buyers, financial institutions are showing an increase in interest, and the long term value continues to expand.
Technicals are bearish currently as Bitcoin remains below the 200 weekly moving average and was rejected from this resistance level last week. As long as price stays below this level, we can expect the downtrend to continue.