Bitcoin (BTC) Recovers, But for How Long?

Bitcoin (BTC) regained a price level not seen since the middle of June. The dominant crypto climbed to $24,195 on Wednesday, marking over 5% growth during the past 24 hours and a 20% increase over the past 7 days in total.

Various indicators show optimistic crypto market recovery signs, but the bigger macroeconomic factors remain vague and unclear. 

Signs of Returning Optimism

The general market sentiment finally left the Extreme Fear zone on the Crypto Fear and Greed Index and settled in the fear zone for the first time in April. 

The recent Bitcoin price surge brought the ratio between Bitcoin long and short orders to its highest point since early May, says crypto analytics firm Santiment. The ratio shows what amount of assets is available for short selling compared to the already borrowed and sold asset amounts. Traditionally, the higher ratio indicates the positive sentiment of investors. 

In addition to that, the number of small Bitcoin holders has been increasingly growing for some time already. As stated by blockchain data intelligence firm Glassnode, the number of wallets holding from 0.1 to 1 Bitcoin increased significantly during the past month when the price of BTC lingered around $20K levels. Moreover, the number of non-zero BTC wallets accordingly reached an all-time high of 42.5 million, Glassnode reports.

What’s Driving the Bitcoin Recovery?

The industry experts name broader equity market recovery as one of the key forces that triggered the recent optimism across cryptocurrency markets. 

The major stock indexes like the Dow Jones and S&P500 have bounced from the declines of last month. The optimistic sentiments returned after the corporate earning reports showed better financial results than expected from Q2.

The positive reaction was also boosted by talks of lower Fed interest rate hike plans, that should reach 0.75 percentage points instead of the prior range of 1.00 to 1.75. 

A Little Perspective

Despite the bullish moods, Bitcoin and the crypto market in general remain sensitive to the macroeconomic conditions and the situation across broader financial markets. There are a number of factors that might weigh on the BTC price in the future.

First, high energy prices around the world are slowing consumption and threatening an economic recession. Despite central banks’ attempts to increase the interest rates, inflation levels are historically high and growing, especially across European countries that are traditionally active in crypto.  

Furthermore, the value of the US dollar reached the highest point during the past 20 years, meaning that other currencies worldwide get decreased compared to the world’s main reserve currency. Economists say that the US dollar is considered a safe haven in times of worsening economic conditions. 

Despite that, the crypto market itself is shaken by internal problems like the bankruptcies and liquidations of firms like Celsius and Three Arrows Capital. The crash of big capital crypto lenders sparked fair and liquidity withdrawals from smaller-scale projects. Financial difficulties and volatile market conditions already led several market players to halt crypto withdrawals.

Finally, during the past few weeks alone, Bitcoin miners offloaded the largest amounts of their holdings since January. Last week 14K Bitcoins, worth more than $300M, were sold by miners in less than 24 hours. Bitcoin miners selling during the market downturn typically indicate their fear of further decline.

The crypto bear market has not yet ended, says the world’s largest digital asset manager Graysclae in its latest report. According to it, the recent crypto winter might last for another eight months.

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