- On-chain metrics signal Bitcoin’s transaction volumes at a 3-year low, indicating subdued investor activity.
- The PoW (Proof of Work) Floor pricing model suggests that Bitcoin’s price could plummet by 40%, potentially bottoming out below $15,000.
The State of Bitcoin: Data Speaks Louder than Speculation
Recent movements in the Bitcoin market have revealed a state of stagnation, with its price lingering just above the $26,000 mark. Technical analyses, corroborated by the PoW Floor pricing model, point toward a potential 40% price drop, which could send Bitcoin tumbling to sub-$15,000 levels. Notably, Bitcoin has exhibited robust support at the $20,900 mark, making this downturn not entirely predestined.
'It Went Up, So Will Keep Going Up' Risks in Bitcoin –
The lessons of high-performing, widely hyped assets show price reversion may be the greater risk once the masses jump on board. #Bitcoin at about $26,000 on Aug. 28 is slightly below the end of 2020, similar to… pic.twitter.com/3UdAbpLNLe
— Mike McGlone (@mikemcglone11) August 28, 2023
It’s crucial to comprehend the role of the PoW Floor pricing model in this scenario. This analytical model gauges the minimum feasible value of Bitcoin, predicated on the cost of electricity required for mining. A 40% reduction, as predicted by this model, would historically denote the end of bearish market cycles, according to crypto journalist Ali Martinez.
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SEC’s Looming Decision and Investor Inactivity
Investor anticipation is palpable as the U.S. Securities and Exchange Commission (SEC) prepares to make a decisive ruling on spot Bitcoin ETFs come early September. This impending decision is likely to serve as a pivotal moment, potentially injecting volatility into a market that currently remains inert.
Simultaneously, on-chain data analytics reveal a telling pattern—Bitcoin’s transaction volume has plummeted to its lowest in three years. To elucidate, transaction volumes include peer-to-peer payments, miner fees, exchange fees, and withdrawals. This lack of investor activity is emblematic of the market’s current volatility aversion.
The Risk Outlook: A Historical Lens
Historically, August and September have often been turbulent months for Bitcoin and the broader cryptocurrency market. Bloomberg’s senior commodity strategist, Mike McGlone, posits that Bitcoin’s strong performance this year should temper expectations for its short-term future. McGlone suggests that the crypto asset is unlikely to scale new heights in the near term, given its already bullish trajectory this year.
Various events are slated for the upcoming week, creating the potential for increased market volatility. With the SEC decision looming and technical indicators signaling a bearish trend, the landscape is rife with uncertainties. Thus, as stakeholders await these market-defining moments, caution appears to be the watchword.
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