The price of Bitcoin has been trading within a narrow range of $29,900 to $31,160 for the past 18 days, leaving investors perplexed and searching for explanations. Despite a significant rally in mid-June that pushed Bitcoin to its highest price in over a year, the cryptocurrency has struggled to maintain prices above $31,000. This, coupled with neutral on-chain and derivatives data, has left investors uncertain about the future direction of Bitcoin.

Investor expectations were further heightened when BlackRock, the world’s largest fund manager, applied for a Bitcoin exchange-traded fund (ETF) on June 16. Some analysts even predicted a price target of $100,000 for Bitcoin by the end of the year. However, the current price stagnation has frustrated traders who were betting on continued upward momentum.

To understand the current situation, it’s essential to consider the historical context. In mid-April, Bitcoin experienced a brief consolidation phase around $30,000 before eventually dropping to $28,000. This previous price movement has made investors wary of building positions at the current levels, leading to a preference for range trading.

The regulatory environment has also played a significant role in Bitcoin’s recent price action. While there was initial excitement about the possibility of the United States Securities and Exchange Commission approving a Bitcoin instrument for traditional financial markets, there has been negative price pressure due to regulatory actions against major exchanges like Coinbase and Binance. The combination of positive triggers, such as the ETF application, and a stricter regulatory environment has contributed to the current state of Bitcoin’s price movement.

On-Chain Analysis: Lack of Active Users and Whales Accumulating Bitcoin

When analyzing blockchain data, it is crucial to start by looking at network activity beyond just trading and exchange flows. The number of active users on the Bitcoin network is a key metric to consider. Unfortunately, Bitcoin’s seven-day active addresses have failed to surpass 1 million, reaching levels similar to three months ago. Additionally, the peak of 1.02 million addresses in April 2023 was 16% lower than the all-time high in January 2021. This stagnation in active user growth suggests a lack of bullish momentum.

To evaluate institutional demand, it is important to analyze the network’s address count for addresses holding a minimum of 100 Bitcoin, which equates to over $3 million at current price levels. Upon closer examination, the indicator has remained unchanged at 15,900 addresses for the past few months. This lack of growth in the number of whales accumulating Bitcoin further supports the notion that the ETF launch has not triggered significant bullish momentum.

Derivatives Analysis: Contango Premium and Lack of Confidence from Professional Traders

Examining Bitcoin derivatives metrics can provide insights into the demand for leverage from professional traders. In neutral markets, Bitcoin quarterly futures contracts typically trade at a 5 to 10% annualized premium, known as contango. The Bitcoin futures premium crossed the neutral 5% threshold on June 26, just five days after breaking the $30,000 support level. This shift towards bullish sentiment took investors 18 months, signaling a potential increase in liquidations and panic selling if the price were to drop by 8% in a short period.

Another useful metric to consider is the 25% delta skew in the options markets, which indicates when arbitrage desks and market makers overcharge for upside or downside protection. A rise above 7% in the skew metric suggests anticipation of a Bitcoin price drop, while periods of excitement tend to have a negative 7% skew. However, the 25% delta skew failed to sustain levels below the neutral threshold for more than four days, indicating a lack of sustained bullishness. The balanced demand between call and protective put options further reflects a lack of confidence from professional traders.

Considering these findings, it is disappointing that on-chain and derivatives data do not support the bullish momentum needed for further price gains. Despite a recent rally above $30,000, the data fails to reflect increased optimism, potentially influenced by Bitcoin’s price being 56% below its all-time high and the impending court rulings against major exchanges. The current state of Bitcoin remains uncertain, leaving investors searching for clearer signals of the cryptocurrency’s future direction.

Analysis

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