Bitcoin Price Analysis: Here’s What’s Holding Back A Rally To $30k

The Bitcoin price remains in a crucial situation in which neither the bulls nor the bears have been able to gain the upper hand so far. While the bears feel comfortable that they can push the price below $25,000 due to a perceived head and shoulders pattern, the bulls are scrambling to invalidate this thesis.

Both sides still have a chance to win. While the bulls want to prevent a daily close of Bitcoin above $27,550, the bulls are fighting to do just that. The goal is to break the H&S neckline to confirm the invalidation of the pattern.

Why $30,000 Is A Big Challenge For Bitcoin Right Now

However, there are some market forces that are making things difficult for both the bulls and the bears. Some of these factors have been compiled by the analyst “MAC_D” for CryptoQuant. According to him, the rise in the Bitcoin price could be limited for the time being because of the decline in US BTC holdings.

CryptoQuant’s data shows that US institutional investors’ BTC holdings have steadily declined in recent months, presumably due to the uncertain regulatory environment and Operation Choke Point 2.0. In the past, a bull market has always been accompanied by an increase in US institutional investors’ BTC holdings.

This price catalyst could therefore be out of play for the moment until courts or new legislation is created in the US for Bitcoin and crypto. Alternatively, US entities could of course turn to international exchanges and DEXs.

A second obstacle for the bulls is the total supply of stablecoins, which shows how large the buying capacity is in the crypto market. It peaked at $99 billion in February 2022 and now stands at $71.1 billion, suggesting that buying power in the crypto market has declined.

Third, the analyst argues that there is a “lack of new smart money players”. This is said to be “largely caused by supply and demand factors”, which should also be considered in light of the macro situation (tight monetary policy by the US and European central banks, recession fears).

Liquidity Woes And Rising Spot Demand

Moreover, there are other factors that could complicate a rally to $30,000 in the short term. As NewsBTC reported, Jane Street and Jump announced that they are ceasing their market-making activities in the US. As digital asset data provider Kaiko has investigated, this may have a significant impact on market liquidity.

Interestingly, the market depth for BTC has barely changed since the announcement or last month and has remained at a low level. Kaiko interprets this to mean that Jump and Jane Street have already reduced most of their exposure (or have yet to make these adjustments).

Due to the low market depth, Bitcoin’s intraday volatility has increased significantly. Nonetheless, BTC’s 30-day rolling volatility remains low at around 36%, well below the 2020-2022 average, Kaiko said.

Another inhibiting factor could be the net dollar liquidity in the financial markets. Analyst Ted (@tedtalksmacro) recently stated that net dollar liquidity is back to end-March levels. According to him, the fair value for BTC is therefore between $27,500 and $28,000.

Net dollar liquidity trading back to late-March levels.

$95bln USD has been injected by the US Treasury since April 26th

Fair value for #BTC (based on this) seems to be here or slightly higher toward $28k pic.twitter.com/el4PgvXZru

— tedtalksmacro (@tedtalksmacro) May 15, 2023

In the short term, it also requires rising spot interest in Bitcoin. As analyst @52skew writes, spot deltas & CVDs show that the overall spot delta has been quite positive in recent days.

Moreover, he notes how the Binance spot market is still largely driving the trends, with Coinbase also recently leading the moves with a strong positive spot delta (market buying). In his latest tweet, the analyst predicted:

Short liquidity taken & now market is hunting long liquidity. Note funding rate calculation will swing both ways depending on spot & perp difference within funding periods. For now Binance spot is leading the way.

At press time, the Bitcoin price stood at $27,071 and was rejected on the first attempt to break the neckline of the H&S pattern yesterday.

Featured image from iStock, chart from TradingView.com