Bitcoin has been facing a downward trend recently, with multiple indicators suggesting that its price could fall below $29,000 in the near future. This is concerning for investors who are worried about the impact of ongoing regulatory developments and macroeconomic factors on the cryptocurrency market.
On July 13, Bitcoin experienced difficulty breaking above the $31,800 mark, resulting in a 6.3% correction down to $29,700 on July 17. This price action reflects investors’ concerns that regulatory developments and macroeconomic headwinds could drive Bitcoin below the $29,000 level, which was last observed on June 21.
In terms of derivatives, Bitcoin futures have shown increased demand, but Asian markets are slowing down. Typically, Bitcoin futures trade at a slight premium compared to spot markets, indicating sellers’ willingness to delay settlement in exchange for receiving more money. Healthy markets usually exhibit BTC futures contracts trading at a 5% to 10% annualized premium, known as contango. However, between July 14 and July 17, BTC futures maintained a neutral-to-bullish 7% premium, surpassing the 5% threshold. This suggests moderate conviction among bulls following the unsuccessful attempt to break above $31,800.
On the other hand, the Tether (USDT) premium in Asia has been declining. The Tether premium serves as an indicator of demand from China-based retail crypto traders, measuring the difference between peer-to-peer trades and the US dollar. Recently, the Tether premium in Asia reached a discount of 1.8%, marking its lowest point in over six months. This inverse premium trend started on July 12 and has continued to widen, indicating moderate sell pressure.
Regulatory concerns also continue to impact the crypto sector. The recent ruling on the sale of XRP did not definitively determine its status as a security offering, leaving some investors uneasy about potential securities designations for other cryptocurrencies. Additionally, Binance’s announcement of layoffs and ongoing court action from regulators have raised concerns about the exchange’s future.
From a macroeconomic perspective, the environment has not been favorable for Bitcoin and risk-on assets. China’s GDP growth has slowed, falling short of market expectations due to factors such as the ongoing trade war with the United States and government efforts to address debt. These external factors, coupled with the pending court decisions that could negatively impact the two largest exchanges, increase the likelihood of Bitcoin breaking below $29,000.
While there don’t appear to be any specific catalysts restricting Bitcoin’s upside potential, worsening macroeconomic conditions and indications of further interest rate increases by the Federal Reserve in 2023 have created a challenging environment for cryptocurrencies. BTC futures show higher confidence among professional traders using leverage, but the sell pressure from retail investors in Asia limits overall upside potential.
In conclusion, the combination of regulatory concerns, macroeconomic factors, and sell pressure from retail investors in Asia has increased the odds of Bitcoin falling below $29,000. This creates a favorable scenario for bears, as the $30,000 resistance level gains strength. Investors will need to closely monitor these developments to make informed decisions in the volatile cryptocurrency market.
Disclaimer: This article is for general information purposes only and should not be taken as legal or investment advice. The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.