Bitcoin’s Three-Month Rally Loses Momentum as Traders Take Profits

Bitcoin fans might be in for a bumpy ride as the cryptocurrency’s three-month rally shows signs of weakening, with traders increasingly cashing out to secure profits.

Momentum Shift in Bitcoin’s Rally Seems Apparent

Bitcoin’s impressive rally, which has lasted nearly three months, seems to be losing its momentum as traders begin to cash in on profits. Analysts from Bitfinex shared their insights in a market report released on Monday, noting a significant shift in market dynamics. The report indicates that for the first time since Bitcoin’s recent uptrend, the momentum appears to be fading, suggesting a potential change in trend.

Increased Caution Amid Market Gains

After reaching a year-to-date low of $73,273 on April 9, Bitcoin (BTC) experienced a remarkable surge, climbing about 41% to hit $107,380 as of the time this article was being written, according to data from CoinMarketCap. Despite this impressive leap, Bitfinex experts expressed caution. They highlighted that recent order flow data and on-chain metrics imply that Bitcoin may now be entering a consolidation phase or perhaps reaching a local peak instead of continuing with what they call ‘vertical acceleration.’

Institutional Demand Remains Crucial

The analysts placed considerable emphasis on the continuing role of macroeconomic factors and institutional demand, particularly the inflow of ETFs, as vital for Bitcoin’s next move. In fact, US-based spot Bitcoin ETFs recorded inflows on 14 consecutive trading days, starting from June 9, with a whopping $4.63 billion net inflow noted by June 27. Economist Timothy Peterson remarked that last week’s inflows of $2.2 billion were significant and anticipates that this positive trend may extend into the coming week, potentially exerting upward pressure on Bitcoin’s price.

Upcoming Interest Rate Decision on Traders’ Radar

As Bitcoin traders gear up for the Federal Reserve’s interest rate decision on July 30, the anticipation is palpable. Generally, lower interest rates are seen as beneficial for cryptocurrencies. Current estimates, according to the CME FedWatch tool, suggest a mere 19% likelihood that the Fed will opt to lower rates during that upcoming meeting. Analysts maintain that despite the short-term uncertainty surrounding Bitcoin’s trajectory, the overall market structure still appears robust, with support levels holding strong over longer time frames, indicating a possible transition phase ahead.

Experts Remain Bullish Amid Selling Pressure

Still, some analysts are holding onto bullish perspectives. Economist Donald Dean mentions that Bitcoin seems poised to move higher, supported by tight consolidation at the volume shelf, which can be seen as a resurgence signal for the cryptocurrency. Meanwhile, Charles Edwards, founder of Capriole Investments, points to long-term holder selling pressure as a key factor impeding Bitcoin’s price growth, particularly considering the fresh influx of institutional investments since the launch of spot Bitcoin exchange-traded funds earlier this year.

Tension Between Short-Term and Long-Term Dynamics

With much discussion swirling about Bitcoin’s stagnant price around the $100,000 mark despite apparent institutional interest, analysts point to long-term holders, commonly referred to as Bitcoin OGs, who have reportedly been ‘dumping’ their holdings since January 2024. The ongoing tension between short-term profit-taking and long-term holding strategies is increasingly central to understanding Bitcoin’s price dynamics. The current situation is, indeed, quite complex and will be closely monitored by all market participants in the coming weeks as they try to navigate these turbulent waters.

In summary, Bitcoin’s recent gains are under scrutiny as traders take profits amid slowing momentum. Analysts emphasize the critical role of macroeconomic factors, particularly ETF inflows, for Bitcoin’s future trajectory. While some maintain a bullish stance, external pressures from long-term holders may continue challenging sustained growth as the market waits for key decisions that may impact the outlook.