Bitcoin is currently missing this “secret ingredient” from the 2017 bull run

September has been compared to a roller coaster ride for the crypto market. Especially for Bitcoin, after hitting a multi-month high of $ 52,000 before falling below $ 40,000 shortly thereafter. While the current halving cycle started off pretty well with price outperforming the previous cycle’s uptrend, it now appears to be slowing.

BTC Price Chart | Source: Tradingview

So what drove Bitcoin’s parabolic upward movement and what is missing this time?

Components are missing

While many in the market see BTC as a global reserve asset, Bitcoin has a market cap of only around $ 900 billion – too low for global reserve assets. Apple’s market capitalization is 2.5 times, while gold – the store of historical asset – is 10 times its value.

Although Bitcoin has risen almost 5.5 times in the last 1.5 years, the market is still unsatisfied and even predicts an increase of 10 times. There is speculation that the above will happen this cycle, but for now, the lack of retail FOMO seems to be holding back.

The graph below shows the evolution of the Bitcoin price during the 2nd and 3rd halving cycles, while the different colors emphasize the number of coins held by retail addresses.

Green is neutral, blue is bearish, and red means the holder has been bought. As can be seen from the chart of econometrics, during the great parabolic movement 4 years ago, the retail audience was in high FOMO (fear of missing out) mode for 1.5 years until it peaked.

In contrast, the current cycle on the retail side is much quieter.

The source: Ecoinometry

Considering the change in the amount of BTC from addresses with less than 10 bitcoins in 30 days, it’s worth noting that retailers who actively shop during the 2017 cycle are missing out on the promotion this time around.

The 2017 FOMO phase drove the price of BTC up 20 times the following year. Hence, the return of the retail FOMO this year could lead to a wild bull run as well. But why haven’t they appeared yet?

Will risk and volatility make retailing go away?

Given rumors that retailers will join in after the launch of Bitcoin Exchange Traded Funds (ETFs) in the US, many believe the SEC’s decision could break the psychological barrier and generate revenue.

However, this is not yet clear at the time of writing.

Recently, Charles Edwards, founder of Capriole Investments, stated that the world “still views bitcoin as a risky investment”. In addition, almost every Bitcoin correction in 2021 correlates with an S&P 500 correction of -2% or more.

The source: Charles Edwards

This also shows that the high risk associated with the asset has driven retail and new entrants away. For now, this is not the case in the short term, as the increase in the number of new addresses is palpable during the recent recovery in the Bitcoin network. However, the long-term trend suggests that growth will remain below May 2020 through May 2021 levels.

Is Bitcoin actually affected by these metrics, or is there some other stronger factor? The price of BTC is very sensitive to external factors like FUD. For example, at the time of this writing, market-wide pessimism over reports of a debt crisis in China’s Evergrande group, as reported by Bitcoin Magazine, may have suppressed the retail FOMO.

Either way, it looks like Bitcoin needs a big boost from the retail side.

Will the widespread fear in the market continue?

In the past 3 days, Bitcoin price has hit lower lows – first $ 46,800, then $ 42,500, and finally $ 39,600. As the price quickly dropped below $ 40,000 in the final hours of the third day, the fear spread like wildfire. As a result, the fear and greed index fell to a 1-month low.

The above index takes into account factors such as market dynamics, volatility, social trends, dominance and trading volume. Higher values ​​usually correspond to greed, while lower values ​​emphasize the fear of market participants. At the time of creating this indicator, this indicator has a value of 21 (extreme fear).

The source: alternativ.me

In a volatile environment, the more improbable, the more likely. Whenever the “market discussion” or underlying volatility (IV) increases, it underscores the fact that participants expect the market to behave dramatically during the trading sessions.

Source: Skew

At this point it should be noted that if the breaking implicit volatility (ATM IV) declines, options traders essentially rely on the fair value premium they accumulate being high enough in relation to their risk.

Bitcoin price increases regularly when ATM IV falls and vice versa. During the January price crash, the IV was quite high. During the rally in April, the value of this indicator was low – it was limited precisely to the 50-100% area. IV rose again during the May carnage.

The graph attached above shows no abnormal peaks so far and ATM IV is currently in a 50-100% favorable zone. Overall, this is a positive sign.

Source: Skew

Plus, the skew levels seem pretty good at the time of writing. Delta 25 one is the most common measure of the deviation. The above diagram shows 1-week, 1-month, 3-month and 6-month 25-day deviations over the last month.

The y-axis measures the IV difference between a 25-day call and a 25-day put with the same expiration date. Positive deviations often indicate that the market wants to pay for increasing payouts versus decreasing payouts.

In such situations, natural long holders refuse to sell calls on their existing coins, and speculators also buy calls to participate in leveraged bullish bets. Now, the graph below shows that options traders in the market are reasonably optimistic.

Additionally, the put / call ratio is above 1 at the time of writing, which means put traders – the ones trying to hedge downside risk – don’t have much to say.

Looking at the state of the above indicators in relation to the options market, it can be said that not much structural change has occurred for Bitcoin. It’s still in pretty good position to move up in the near future. Therefore, when this happens, the fear will gradually fade from the broader market.

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Minh Anh

According to AZCoin News

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