A foray into cryptocurrency by Intercontinental Exchange (ICE), Starbucks and the Boston Consulting Group has failed to translate into gains for the bitcoin price. In fact, the complete opposite has occurred, with BTC now threatening a bearish reversal from last month’s high.
The cryptocurrency market’s performance over the past five days reflects volatility in over-the-counter (OTC) markets, which continues to discount overwhelmingly positive developments in the blockchain arena. (At the time of writing, Hacked published Coinbase Explores Adding Dozens of Altcoins for Custody, XRP Included.)
After putting up a strong battle in the latter half of July, the bulls appear to be once again relinquishing control of the market. This tug-of-war will continue over the next seven days as the major coins struggle to maintain levels of key support.
Bitcoin Market Is Too Volatile
The cryptocurrency market’s sudden reversal last week wasn’t as surprising as it appeared, based on the technical charts. As Hacked reported last week, bitcoin entered overbought territory on July 24 after prices rocketed above $8,500 for the first time in two months. It took the bears multiple attempts to drive the bitcoin price below $8,000 but they eventually succeeded, paving the way for the latest slide into correction territory.
Bitcoin is now approaching bear-market territory, which is defined as a reversal of 20% or more from the most recent high.
Analysts at UBS have weighed in on the bitcoin price and have concluded that the market is simply too volatile to drive mainstream adoption. As per CCN, the Swiss bank said: “Our findings suggest that bitcoin, in its current form, is too unstable and limited to become a viable means of payment for global transactions or a mainstream asset class.”
Negative capital flow has underpinned crypto’s volatility since January, when the market began its historic descent. Market-wide trade volumes were down again on Sunday, with 24-hour turnover amounting to just $11.3 billion. Trade volumes spiked above $20 billion during last month’s rally.
Bearish Breakdown or Bakkt Driven Reversal?
UBS’ analysis hit the airwaves 24 hours before ICE made arguably the biggest splash in crypto this year. Bakkt, the NYSE parent’s new startup that will hold and manage investors’ cryptocurrency, is not only planning to revolutionize bitcoin investments but streamline mainstream adoption of crypto payments.
As the author speculated on Saturday, bitcoin and the broader cryptocurrency market is discounting the Bakkt revelation. As it turns out, this could be a symptom of unusual trading behavior in the OTC market. According to Tabb Group, a U.S.-based research firm, OTC trades account for 70% of the total cryptocurrency market. By comparison, digital currency exchanges process less than 30% of total market transactions.
If Tabb’s research is correct, fundamental news like the Bakkt announcement is more likely to have a short-term impact on exchange trading but play a lesser role in OTC markets.
Bitcoin’s next inflection point is $6,800; a break below this level would put the leading cryptocurrency in bear-market territory.
The Week Ahead
In terms of major market-moving events, the following headlines are expected over the next five days.
A pair of Eurozone data releases headline a relatively uneventful day for traders. Germany will release its latest report on factory orders for July, while Sentix will unveil the August edition of the Eurozone investor confidence index.
On the policy front, the Reserve Bank of Australia (RBA) will vote on interest rates Tuesday. The benchmark lending rate is forecast to hold steady.
For crypto traders, Coinbase is conducting final testing for Ethereum Classic support on Tuesday.
The Chinese government will release its latest trade figures on Wednesday. According to analysts, Beijing’s dollar-denominated trade surplus likely fell sharply in July.
The Chinese government will release its latest batch of inflation figures on Thursday, including consumer and factory-gate prices.
In terms of monetary policy, the Reserve Bank of New Zealand will deliver its latest interest-rate verdict. No change to the bank rate is expected.
The BlockConscious Summit in Brisbane, Australia will begin on Friday and run through Saturday. The event, which is sponsored by CoinSpot, Binance and others, will feature over 45 speakers.
In economic data, the U.S. Labor Department will release the consumer price index (CPI) on Friday. The U.K.’s Office for National Statistics will release a batch of economic data, including second-quarter GDP, trade balance and industrial production.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.