Despite the positive news seen in the crypto space recently with ICE, the owner of the world’s largest stock exchange, setting up a new bitcoin market, the rumors that bitcoin ETFs are on the way (but maybe not in 2018), and the classification of bitcoin as a commodity by the SEC, the price of bitcoin and altcoins has been steadily dropping in the current downward trend, with bitcoin sliding back below the $7,000 mark once again.
CCN.com reported yesterday that despite a $5 billion rebound in the crypto market, low trading volume made it more likely that another decline in value was incoming, stating:
“However, in the past several hours, the price of bitcoin and ether have started to drop once again, testing $7,100 and $410. If the volume fails to recover in the next 12 hours, bitcoin and ether will likely breach the $7,000 and $400 levels in a similar way as they did on August 5.”
This has now come to pass, with BitMEX CEO Arthur Hayes stating that BTC may need to test $5,000 before a bottom can be established.
However, Tom Lee of Fundstrat believes he has the answer to what seems to be a failing market, and points to one positive that he feels will save cryptocurrency: bitcoin dominance.
Bitcoin market dominance is the ratio of BTC’s individual market cap to the combined market cap of all cryptocurrencies. After plummeting from a peak of 80 percent early last year all the way down to 37 percent, dominance is now at the highest it’s been all year at 48 percent.
Speaking with CNBC, Lee argued that this reflects the fact that investors are indeed responding to the bullish developments in the bitcoin space. While the price has not increased as many had hoped, the increased dominance shows that investors are taking note of the upcoming ETFs and ICE’s soon-to-launch crypto market. As Lee said, the news has caused investors to decide that “bitcoin is the best house in a tough neighborhood.”
Lee went on to point out that the “Misery Index” is also at comfortable levels.
The Misery Index is a method devised by Fundstrat’s to measure what the analysts expect a holder of bitcoin to be feeling. Under 27 is classed as “miserable,” and Lee said that bitcoin tends to do well when sentiment drops so low, whereas the “euphoric” stage above 67 generally indicates that bitcoin may be about to experience a decline.
Currently, the misery index is at 39, which Lee described as being in line with a healthy recovery.
Lee encouraged investors and pundits to put themselves in the shoes of Asian investors, where a lot of the new investments in cryptocurrency is coming from, saying that Asian investors are less likely to be familiar with ICE or be aware of the significance of the recent news. He also stated that the current market is essentially “Peter paying Paul,” moving within itself, and that crypto is still in an early stage with more growth to come.
While the recent bear market may well be discouraging to many, the increased dominance is indeed an indication that BTC is consolidating power within the market. Whether the price action will become more significantly influenced by the numerous positive developments in the crypto space remains to be seen.
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Last modified: June 11, 2020 10:07 AM UTC