Historically low spot volumes and investor reluctance are weighing on the Bitcoin price

If one word could be used to describe how the majority of participants in the crypto ecosystem feel about the near-term outlook for Bitcoin (BTC), it would be “undecided”. as the signals from all indicator types are mixed and many traders are waiting for significant movement either way before planning their next entry.

A new report from Delphi Digital took a look at Bitcoin’s current price action macro and found that several factors, including a low exchange rate volume and a stronger US dollar, weighed heavily on the cryptocurrency.

Bitcoin’s recent drop to $ 31,000 adds to the fear currently pervading crypto markets, and analysts are now warning that a failure to close above $ 31,000 could plunge BTC into the $ 29,000 to $ 24,000 region .

Here are three focus areas that Delphi Digital highlighted as having the strongest impact on Bitcoin’s short-term price action

Spot volume and open interest collapse

According to Delphi Digital, the decline in trading activity is one of the biggest factors affecting the market. This is because after the May 19 sell-off, cash and derivatives traders left the exchanges.

As can be seen in the graph above, after a sharp rise in the first half of 2021, due to the price crash and traders who swear by leverage, the exchange volume has declined by more than 60%.

The rapid decline in BTC price has also helped prevent the use of high leverage by retailers in the derivatives markets, and evidence of this is the decline in open interest levels for BTC futures since early 2021.

Delphi Digital says:

“This cleanup did significant damage to the bull market structure, with the futures contract base close to 0% and the reduction in funding rates for perpetual contracts.”

On a positive note, the massive liquidation event in May helped weed out inflated traders, meaning that “the more aggressive participants were the most important”.

Dollar strength leads to BTC weakness

Another factor affecting the price of Bitcoin is the recent strength of the US dollar, which has been on the uptrend from its low of 89.53 on May 25th.

As can be seen in the above chart, a large inverse head and shoulders pattern has formed on the DXY chart, the section of which is now being tested for the third time.

If the dollar continues to gain strength, the current economic recovery could be threatened as financial conditions tighten and this could weigh on many of the most popular trades of 2021.

Delphi Digital says:

“Commodities, gold, emerging market stocks, bitcoin are all susceptible to a stronger greenback, although the speed at which it moves is still an important factor.”

Bitcoin price drops to long-term support h.

While the 51% drop in BTC price has worried many analysts that another multi-year bear market could begin, it’s important to consider some of the bigger macro trends that are driving conditions.

The graph above shows that prior to the downturn, Bitcoin made gains for six consecutive months and the asset must rebound from a historical perspective.

Even though BTC has been 51% below its all-time high since the start of the year, its price is still 250% above its $ 9,100 valuation as of July 16, 2020.

Bitcoin’s long-term uptrend remains intact, with the price currently testing the 12-month moving average, an important level of support that will determine where the price will rise from here.

Bitcoin Spot and derivatives trading volumes are falling and the prospect of a stronger dollar is weighing on global financial markets. This has resulted in indecision being the main emotion dominating the crypto market right now, and that sentiment is likely to continue until a major price move or a driving event drives the crypto market.