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Crypto: The bullish momentum is losing steam, heading towards a decisive turning point?

Thu 23 May 2024 ▪ 5 min of reading ▪ by Evans S.
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The dizzying rise of cryptocurrencies has often left investors stunned, always hoping for more gains. However, the current trend shows signs of slowing down, raising questions about the market’s future. Is it a necessary pause or the beginning of a turning point?

Crypto stagne

A Crypto Market in Search of Breath

The recent Glassnode report highlights an unavoidable reality: the demand for the primary crypto has significantly slowed down. 

By examining the “Realized Cap”, an on-chain capitalization model for BTC, it becomes evident that the value of each circulating coin is calculated based on the spot price at which it was last moved. 

This method allows for determining the current cost basis and tracking whether capital is entering or leaving the crypto.

During the last all-time high, the realized cap of the flagship crypto experienced rapid growth, indicating a massive influx of capital. 

Today, the trajectory is less steep, and although new peaks are being reached, the increase is significantly more modest. 

Currently, the pace at which new capital is flowing into the Bitcoin network has significantly slowed from its peak as the market digests the recently distributed supply”, states the report

This deceleration in demand raises questions about the market’s ability to maintain its dynamism.

Signs of a Market in Transition

Another revealing indicator of the current situation is the measure of the net profit realized by investors. 

When they sell at a profit, the realized cap increases, indicating demand for coins at a higher price. Conversely, when losses are realized, the measure decreases, signaling a reduction in the total investment in the crypto.

The crypto market absorbed a large amount of profits during the formation of the last all-time high. Since then, the indicator has cooled, illustrating a drop in demand. This situation could indicate that investors are adopting a more cautious approach, waiting for clearer signals before reinjecting capital.

The “Escape Velocity” Theory

Despite this slowdown, some analysts see positive signs for the future. James Check, cryptocurrency analyst, recently used the term “escape velocity” to describe what Bitcoin could do once it reaches the price of $73,000. 

In astrophysics, escape velocity is the minimum speed necessary for an object to escape the gravitational field of a celestial body without additional propulsion. For Bitcoin, reaching this price could mark the start of an acceleration towards new heights.

Check points out that the transition from enthusiasm to euphoria can happen quickly, but the crypto market has not yet reached this point of “euphoric escape velocity”. 

We are still in a regular, stable, enthusiastic bullish phase, but most importantly NOT euphoric”, he explains. This stability could form solid bases for a future price increase, although resistances are to be expected in the short term.

Towards a Decisive Turning Point for Crypto?

The current dynamics of the crypto market, especially bitcoin, show signs of slowing down after a period of intense growth. This slowdown could be a necessary pause, allowing the market to digest recent gains and prepare for a new phase of growth. 

However, caution is advised. Indicators show a decline in demand, and although some analysts remain optimistic about a quick recovery, the reality could be more complex. 

The notion of “escape velocity” mentioned by Check offers hope, but investors must remain vigilant to potential short-term resistances.

The crypto market is at a crossroads. Whether it’s a temporary pause or the beginning of a decisive turning point, only time and future trends will tell. Investors will need to navigate with caution and discernment to seize opportunities while minimizing risks although enthusiasm wanes.

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Evans S. avatar
Evans S.

Fasciné par le bitcoin depuis 2017, Evariste n'a cessé de se documenter sur le sujet. Si son premier intérêt s'est porté sur le trading, il essaie désormais activement d’appréhender toutes les avancées centrées sur les cryptomonnaies. En tant que rédacteur, il aspire à fournir en permanence un travail de haute qualité qui reflète l'état du secteur dans son ensemble.

DISCLAIMER

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.