Bitcoin price stagnant for yet another week despite record inflation – here’s why
BTC has failed to repeatedly breach its all-important AUD$69k resistance as US inflation numbers scale up to a 4-decade high.
- A study has revealed that Bitcoin's open interest (OI) ratio has dipped by a whopping 50% since the 4 December crash.
- The total market cap of the digital asset sector has continued to hover around the AUD$3.32 (US$2.38) trillion mark over the past week.
- BTC's fortnightly losses currently stand at 14.3%.
Bitcoin, the world's largest cryptocurrency by total market capitalisation, has continued to confound investors across the globe by continuing to showcase an increasing amount of monetary stagnation, especially after many analysts had projected the flagship crypto to scale past the AUD$140k (US$100k) mark by the end of 2021. At press time, BTC is trading at a price point of AUD$68,370.
Since the market crash witnessed earlier this month, Bitcoin has struggled to sustain its price support of AUD$66,000 (US$47,500), causing over AUD$1.17 billion in leveraged BTC long futures contracts to be wiped out from the market. This extreme volatility, in large part, seems to have been spurred by news of a new coronavirus variant Omicron, as well as US inflation numbers recently scaling up to a 40-year high.
The overall bearish mood has been compounded by news of leading Chinese real-estate developer Evergrande defaulting on its US dollar debt estimated to be worth US$300 billion.
Despite BTC's price correcting by nearly 24% over the past month, something that may have scared potential newcomers from making their way into the market, HODLers and whales have continued to add to their existing positions as usual. Fintech firm MicroStrategy revealed on 9 December that it had added 1,434 Bitcoin to its coffers, taking the firm's total digital asset holdings to 122,478 BTC.
Massive upside in store for BTC?
As per historical data available online, every time the price of Bitcoin has dipped steeply, the asset has witnessed a significant decrease in its OI across various derivative exchanges. A recent study from Delphi Digital suggests that following the recent market downturn, a 50% decrease in OI has been recorded.
And, while these numbers may look quite discouraging, it should be noted that deleveraging events such as these indicate a good long-term upside for BTC. In fact, analysts for Delphi believe that the ongoing sell-off could finally be tapering off and that the cryptocurrency will start on a path of upward ascent once again over the next few months.
Range-bound trading may be witnessed for some more time
In regards to BTC's immediate price action, Ben Lilly, co-founder of Jarvis Labs, believes that the flagship cryptocurrency will most likely continue to trade in its current price range, at least for the next 2–3 weeks. He noted that this will be the case primarily due to 31 December marking "the largest open interest in terms of open contracts".
Lilly also believes that whenever the market witnesses a major pullback such as the one observed recently, it usually takes some time for the ecosystem to make a full recovery. It will be interesting to see how the market continues to behave as we prepare to close out yet another calendar year.
Disclosure: The author owns a range of cryptocurrencies at the time of writing.