Bitcoin exhibits characteristics of a late bear market

Bitcoin is in one of its quietest market periods since 2019. According to a new Bitfinex Alpha analysis, the price is showing characteristics typical of a late bear market: trading volume has fallen back to early 2019 levels, blockchain transfer speed is at a seven-year low, and Bitcoin ETFs saw a net outflow of $385.2 million last week.

Bitcoin is available at OKX and Bybit.

In brief:

• Bitcoin is trading between the realised price of long-term holders ($52.700) and short-term holders ($67.200), with the median price of $63.200 acting as support.
• Trading volume and on-chain activity have fallen to multi-year lows, while Bitcoin ETFs and corporate treasuries simultaneously acted as sellers.
• Stablecoin supply fell by 4.5% from the May peak to $300.7 billion, indicating that no new liquidity is entering the crypto market yet.

Price stuck between two levels

Bitcoin closed 3.1% lower last week at $62.900, while the price currently stands at $64.200. Bitfinex Alpha describes the current market situation as a stalemate on higher timeframes, with Bitcoin wedged between the overall realised price of $52.700 at the lower end and the realised price of short-term holders of $67.200 at the upper end.

The median realised price of $63.200, a metric reflecting the average realised price of holders who have recently moved coins, has been acting as support for the past two weeks. A break below that level would bring a retest of the June lows around $57.800 into view. Retaking $67.200 would restore profitability for short-term holders.

Notably, both Bitcoin ETFs and corporate treasuries sold more than they bought on balance last week. Strategy carried out its third consecutive weekly sale, offloading 1,690 Bitcoin. The fact that both parties acted as sellers at the same time is, according to Bitfinex Alpha, a rare signal.

Liquidity remains absent despite improved macro climate

The macroeconomic picture actually improved last week. US inflation cooled, producer prices remained flat, and the probability of a rate hike in September fell below 50% for the first time in 22 days. The S&P 500 closed at record highs on 12 and 13 August, but Bitcoin did not benefit.

Bitfinex Alpha points to a crucial difference: equities respond to expected liquidity, while crypto depends on actual liquidity arriving on chain. That final step has yet to materialise. Stablecoin supply fell by around 4.5% from the May peak to $300.7 billion, suggesting that fresh capital has not yet reached the crypto market.

Nevertheless, Bitfinex Alpha sees some reason for cautious optimism. The current realised price levels show that the broad group of long-term holders is not yet under water. Historically, such periods of extremely low market activity have preceded a sharp increase in volatility. Given the current market structure, Bitfinex Alpha considers it more likely that such a volatility breakout will occur to the upside, provided ETF inflows return and stablecoin supply grows again.