Bitcoin Waiting For A Catalyst

Bitcoin In A Range

While retail investors have historically driven the BTC price higher, the Bitcoin cycle dynamic is increasingly shaped and determined by institutional investors and treasury companies.

That may explain why explosive moves to the upside have been more muted in this cycle.

Bitcoin perpetual futures funding rates are currently low at just 2.6%, and the Spent Output Profit Ratio (SOPR) also suggests that long-term holder activity is relatively low.

The demand momentum for spot Bitcoin is negative, which signals limited retail interest and supports the view that much of the activity is institutional.

On-chain analysis confirms that Bitcoin volatility over the last 30 days was 8%, which is low. BTC has been locked in a tight trading range of +/- 4%.

The probability that Bitcoin will remain within this range over the next 30 days is approximately 50%.

But is it the calm before the storm?

The market is pricing in significant upside or downside risk. While the direction is still not clear, the options market is signalling a downside move.

That aligns with the seasonal trend in traditional finance markets, where historically, the second half of June has been a poor performance period for the S&P 500.

It also aligns with the fact that the ISM, which we use as a guide to the health of the business cycle, remains below 50 and is not positive.

The business cycle is a key factor in the relative performance of all assets, and Bitcoin is no exception.

In previous cycles, the performance of BTC is highly correlated with the ISM.

While the performance of Bitcoin and the stocks in the S&P 500 have been positive this year, in contrast, Main Street and small businesses continue to struggle.

Disposable income, or disposable earnings, is a significant factor that drives the recycling of capital and investment in speculative assets. That has been a driver of the real Bitcoin cycle.

A cut in interest rates would be a positive catalyst.

Liquidity

That said, the global M2 money supply, which has proven to be a reliable forward indicator and a proxy for liquidity, has continued its upward trajectory.

Liquidity underpins the business cycle, and the current direction of the global M2 money supply is positive for Bitcoin and the ISM.

To add to the mix, markets have witnessed the weakest first six months of the year for the dollar index since 1986. That trend of weakness will likely continue.

BTC is inversely correlated with the U.S. Dollar, and therefore, it’s no surprise that while the dollar has declined by 10%, the BTC price has increased by 10% in the same period.

If Bitcoin can regain $108k and push through $112k, then short positions will have to cover that move, and the resultant short squeeze could form the basis of the next leg up.