The three factors with the potential to bring bitcoin out of its summer slumber

The markets are abandoned these days to the usual summer tranquility, when the opportunities and the volume of operations is lower than normal, a panorama that is especially noticeable in cryptocurrencies. While global stock markets in general maintain the good tone they have been showing throughout the year, despite growing doubts about the coronavirus and the expansion of the Delta strain, bitcoin and the rest of 'altcoins' have not just come out of the correction that has lasted for two months now, but a number of factors can enliven the summer period for crypto assets.

Bitcoin has left the trading range between $33,000 and $55,000 this Wednesday, due to the shock caused by US inflation, but maintains a consolidation movement that encapsulates it between 30,000 and 40,000 -support and resistance, respectively, of major importance-. Data from June indicates that this behavior is inherited from the previous month, when the volume of operations and the withdrawal of capital from crypto exchanges plummeted.

Specifically, the first magnitude has fallen by 40%, due to the fear that has settled in the markets due to China's repression of cryptocurrencies. Analysts explain that these fears, coupled with the fact that the two main currencies, bitcoin and ethereum, are changing hands at half the price of two months ago, translates into fewer new wallets and capital flows still They have not turned to crypto assets trading platforms.

However, the accumulation that is being seen by the large accounts is a bullish signal, as evidenced by data compiled by Glassnode. In a July 12 report, the blockchain analytics firm reveals that bitcoin reserves on centralized exchanges have fallen again to levels not seen since April, when the creation of Satoshi Nakamoto marked its historic milestone at approximately $ 65,000.

Investors scrutinize all of this data and the fundamentals of both bitcoin and ethereum trying to figure out which direction the market will take in the next few weeks or months. The short-term catalysts that could affect investor behavior are mainly two: the liquidation of the shares of the fund of Grayscaleen the queen of crypto and the London update of the ethereum network, scheduled for August 4.

The first of these two events kicks off this week and will unfold in the remainder of July, when about 40,000 bitcoins are expected to be released - as the six-month lock that remained active on January's Grayscale Bitcoin Trust shares was lifted, when it received record investments of $ 1.7 billion. Analysts warn of a possible sell-off of shares tied to this multi-billion dollar investment vehicle, which has 654,600 bitcoins, with the potential to test the $ 30,000 support.

JPMorgan analysts expect investors to sell at least some of their shares, which will cause "downward pressure on the fund's prices and on bitcoin in general." However, it remains unclear whether investors will reinvest the proceeds in Grayscale by buying back bitcoin and transferring it to the trust. If that happens, bitcoin is likely to get a strong boost. It is planned that on July 18, the largest number of shares will be unlocked in one day: 16,000 bitcoins.

A little later and already in August, the improvements that will be applied to the Ethereum network, known by the name London, will have an effect on the price of ethereum, since they are the first step for Ethereum 2.0. At the moment, only the lowering of transaction costs is already expected to have a positive effect on the second largest currency in the world and that it can encourage bitcoin and the rest of 'altcoins'.

THE GRAPHICS POINT TO AN EXPLOSION OF VOLATILITY

Third, technical analysts draw attention to bitcoin price action, as technical analysis reveals "a menacing chart filled with sound and fury," in the words of Rich Ross, technical strategist at Evercore ISI, in a note. This expert foresees a first resistance at $ 36,000, with support at $ 33,000 and $ 30,000, and a decline to $ 22,000 or less. Ether "is relatively more constructive, especially above $ 2,400," he adds. Ross.

As for volatility, chartists are also warning that Bollinger bands are swirling around the price of bitcoin, essentially warning of an upcoming rally. Bandwidth, defined by the percentage difference between the upper and lower bands, is flirting with year-to-date lows, while the 14-day 'Average True Range' is near its lowest levels of the year.

On the other hand, the 60-day moving correlation between bitcoin and spot gold has turned negative, a situation that has only occurred a few times since 2018. In reality, this can be seen as a positive, as a lower correlation makes an asset more desirable for diversification purposes in asset allocation.

Translated by Caoimhe Toman