Bitcoin investor sentiment reaches a new low despite improvements in macro and equity markets. Several key indicators shed light on the reasons behind Bitcoin’s continued price decline. Over the past 40 days, Bitcoin has been moving within a range near $29,300, causing anxiety among crypto investors.
One contributing factor to traders’ increased tension is Bitcoin’s historically low volatility. The current 33% annualized 50-day volatility is the lowest in six months, contrasting with the much higher volatility observed throughout most of 2022. While volatility can be used to predict trends, it only provides information about the magnitude of daily price oscillations.
Another indicator of declining interest in Bitcoin is its diminishing market dominance. On July 30, Bitcoin’s market share dropped to 49.5%, the lowest level since June 16. This shift can be attributed to a favorable legal decision for altcoin Ripple Labs, reducing regulatory risks associated with altcoins. Between December 2022 and June 2023, Bitcoin’s dominance had increased from 40.2% to 52%.
Decreased network activity also signals negative investor sentiment. Bitcoin’s 1-year active supply, representing the sum of unique BTC transacted in the trailing 12 months, reached its lowest level since February 2016. The decreasing on-chain activity raises concerns, particularly with the potential approval of spot ETFs in the U.S. Additionally, the Lightning Network, an alternative solution, shows limited growth with only $138 million in Total Value Locked (TVL) and a stagnant number of nodes.
Bitcoin options traders are also losing confidence, as indicated by the 25% delta skew metric, which reveals a decline in bullish sentiment. Currently flat at 1%, the metric suggests a balanced demand between call options and protective puts, signaling a neutral market. However, it reflects decreased bullishness compared to previous periods.
As investor sentiment worsens and multiple indicators point to increased tension, Bitcoin faces mounting pressure in the near term. Falling dominance, lackluster network activity, and concerns in the options markets all contribute to the potential negative impact on Bitcoin’s price. On the positive side, cautious traders may reduce the likelihood of excessive liquidations among leveraged traders.
Disclaimer: This article provides general information and is not intended as legal or investment advice. The views expressed are solely those of the author and do not necessarily reflect the opinions of Cointelegraph.