Bitcoin is approaching a critical level of resistance as it was finally able to break out of its price action to the downside. The cryptocurrency still faces numerous hurdles if it wants to recapture previous highs, but some clues point to possible relief in the near term.
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At the time of writing, the benchmark cryptocurrency is trading at $31,400 with a 5% gain in the last 24 hours and a 6% gain in the last week. This has been one of the best trading sessions for BTC price in the last week and suggests a potential change in market sentiment.
Meltem Demirors, chief strategy officer at investment firm CoinShares, Recently shared new data on the general sentiment in the market. As the price of BTC fell to $24,000, the sentiment has favored the bears.
However, CoinShares has seen an increase in net inflows of publicly traded Bitcoin products. These investment vehicles saw inflows of $126 million last week alone and suggest investors have become more bullish.
(…) with 2 consecutive weeks of net inflows across all crypto products, investors are buying the dip.
This uptick in BTC market sentiment contrasts with that recorded for Ethereum (ETH). The second crypto by market capitalization has been posting severe losses.
Investors appear to be fleeing to Bitcoin due to uncertainty surrounding the macroeconomic outlook and uncertainty over the next rollout of “The Merge,” Demirors said. This has been reflected in the ETH investment products that have registered their 9the consecutive week of outings.
“The Merge” is the event that will combine Ethereum’s execution layer, ETH 1.0, with its consensus layer, ETH 2.0. The latter will be backed by the proof-of-stake blockchain or “Beacon Chain”. The event has been delayed several times, but appears to be making progress.
Bitcoin to see any short-term relief?
Overall, CoinShares noted, digital asset investment products saw inflows of $100 million last week. The positive flow did not translate into price action as most cryptocurrencies remain range bound.
Additional data provided by Demirors highlights some movement in the options sector. Market participants took long (call) positions as inflows increased, but have since returned to “defensive hedging with put options in the second half of the week”.
These factors could contribute to short-term relief for Bitcoin. Economist Michael van de Pope supports this thesis. As seen below, expect BTC price to retest resistance at $34,000 if it is able to maintain its current momentum.
However, macro conditions still look unfavorable for Bitcoin and risk assets. As NewsBTC reported, any new narrative pointing to a global economic downturn and the like could play in favor of cryptocurrency and risk assets.
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This could force the US Federal Reserve to slow its monetary tightening and provide more breathing room for risk assets.