Lacking a positive catalyst, Bitcoin's $28,000 mark is still difficult to cross

Bitcoin is on track for its first negative monthly return since November in the absence of a positive catalyst.

Written by: Mary Liu, BitpushNews

Bitcoin briefly regained its $28,000 loss for the first time since the start of the month after the Biden administration reached a tentative deal with Republican lawmakers on the U.S. debt ceiling. However, according to data from the push terminal, as of press time, Bitcoin has fallen back below $28,000, and the trading price of Ethereum is hovering around $1,910.75.

From a liquidity and macro perspective, due to the lack of positive catalysts, Bitcoin may record its first negative monthly return since November last year.

Whale supply indicators are stagnant

According to data from on-chain analytics firm Santiment, the "supply distribution" indicator shows that BTC whales have become more cautious over the past few weeks. Supply distribution measures the total amount of bitcoin currently held by each wallet group in the market.

Santiment defines whale wallet holdings as 10-10,000 BTC. The graph below shows the supply distribution trend for this address group over the past few months:

As can be seen from the chart above, the total holdings of these addresses started to decline after a surge in March. When these investors sold, prices mostly traded sideways, meaning it was selling by these groups that may have slowed the rally. Then, in mid-April, as BTC hit a local top near the $31,000 mark, whale supply instead hit a local bottom. Those investors then started accumulating as prices trended lower. This pattern means that these holders are starting to take advantage of the lows to buy again.

The data shows that these addresses have collectively added about 93,000 BTC ($2.6 billion at current prices) to their wallets since accumulating after the local high in April.

However, supply to these addresses has started to stagnate in recent weeks, and this new sideways trend may indicate that big investors are now wary of buying more as they are unsure of where BTC will go next.

Liquidity is hovering at a low level

As debt ceiling talks weighed on crypto investors last week and the latest Fed minutes also showed central bankers were divided on the direction of rate hikes, Bitcoin’s correlation with gold has retreated from this year’s all-time highs to start behaving more aggressively like a risky asset.

Bitcoin is currently testing its March resistance at around $28,800, said Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank.

The crypto market has been lacking in liquidity stimulation recently. "In the medium term, funds will be withdrawn from riskier assets and used to buy government bonds. The result may be trading volumes and flows in the stock and digital asset markets," Matteo Greco, research analyst at investment firm Fineqia International, said in his report. slowing down further, with a potentially negative impact on prices.”

After a long period of unusually low volatility, Bitcoin's next major price move could be imminent and could push BTC to $32,000, according to James Check, chief on-chain analyst at Glassnode. In an interview with Cointelegraph, Check explained that this price level is where Bitcoin’s “true cost basis lies.”

To calculate Bitcoin's average cost basis (the average price to buy BTC) Check and his team removed forever lost or dormant coins from the calculation, focusing on active Bitcoin investors. "That's where the level of mean reversion is, so honestly, it wouldn't surprise me to bounce back to that level," he said.

Despite this bullish scenario, Check also pointed out that a large number of investors may be tired of the bear market and wait for Bitcoin to reach that level before selling, putting pressure on the price: “This is the area where you start to encounter more resistance” .

Correlation of USD Index

Bitcoin’s price action is closely tied to macroeconomic conditions. Bitcoin has been held back below $30,000 in recent weeks amid headwinds such as a strengthening U.S. dollar index (DXY), a rebound in interest rates and the possibility of further rate hikes by the Federal Reserve.

In his tweet, Glassnode co-founder Yann Allemann analyzed the possibility of a Bitcoin rally amid changes in DXY and interest rates.

According to Allemann, the U.S. dollar index — DXY — which measures the greenback against a basket of six major currencies, has been a key factor influencing bitcoin’s price. The strength of DXY is inversely related to Bitcoin, which means that when the US dollar index strengthens, Bitcoin generally weakens, and vice versa. The expected turning point of DXY at the 106-107 level may indicate a bullish position for Bitcoin.

Additionally, a shift in macroeconomic conditions could boost Bitcoin’s momentum. Congress will vote on the legislation as early as Wednesday, and it remains to be seen whether the debt-ceiling agreement can pass on Wednesday.

According to the comparison terminal data, as of now, the trading price of Bitcoin is 27,782 US dollars. If there is no major positive news stimulus, Bitcoin and Ethereum may usher in the worst month since November last year.