Bitcoin Rallies Keep Getting Quickly Sold — What's Up?

The world’s largest cryptocurrency has lacked sustained momentum, as it sells off shortly after each attempted leg higher.

AccessTimeIconAug 10, 2023 at 5:17 p.m. UTC
Updated Aug 10, 2023 at 6:44 p.m. UTC

After a quick surge to start the year resulted in a near doubling of its price, bitcoin (BTC) has traded mostly in a tight range for the past few months, struggling to hold above $30,000 for a sustained period of time.

Since April, and in particular since mid-June, bitcoin's has reversed abruptly anytime it has attempted a breakout above $30,000. The most dramatic occasion came on July 13 when the cryptocurrency surged to a one-year high above $31,800 following a favorable court ruling for XRP in the U.S. Securities and Exchange Commission case against Ripple, the firm that sells XRP. Within hours, bitcoin gave up not just the $31,000 level, but also the $30,000 one, and within days slid below $29,000.

The most recent example came this week, when the price climbed throughout the day on Tuesday to top $30,100 late that afternoon. Before news stories about the rally could even be published, bitcoin slipped back more than 1% to about $29,700. Its price at press time was $29,400.

To be sure, dips in bitcoin during the past few months have also proven to be short-lived, with prices quickly rebounding each time the price declined below $29,000.

Bitcoin's price chart for the past month
Bitcoin's price chart for the past month

Awaiting regulatory clarity

Analysts are pointing to a number of reasons behind the rallies struggling to hold. One i is that many buyers are sitting on the sidelines until they receive clarity on whether the SEC will soon allow a spot bitcoin exchange-traded fund.

“The market is stuck whilst it awaits new fundamental information,” said Spencer Hallarn, a derivatives trader at market maker GSR. According to Hallarn, until the SEC makes a decision on the recent flurry of spot bitcoin ETF applications, the market will remain flat.

The much anticipated news awaited from the SEC comes after financial giant BlackRock (BLK) filed for a bitcoin spot ETF in mid-June, spurring a number of other traditional asset managers to follow with their own applications (or re-filing of previously denied applications).

Miners are sellers

According to Sean Farrell, head of crypto strategy at FundStrat, another reason behind the lack of momentum is that miners are taking profits ahead of the Bitcoin halving. The so-called halving — where block rewards are cut in half to 3.125 bitcoins from the current 6.25 — is expected to take place on April 16, 2024. “It is evident that this cohort is taking profits following major rallies and capitulating during extended periods of flat price performance,” Farrell said.

The lame follow-through to any rally could also be merely due to a sustained lack of new retail participation in the market, Farrell suggested. “The good news is that this pattern is emblematic of the earlier portions of prior bull markets,” he said. “Some positive ETF news could certainly push us out of this sideways grind.”

Coiling for a big move

“The market has remained in such a tight range for the last month and change has allowed options open interest to cluster in the same area, which results in volatility being suppressed until it gets outside of the recent range,” Hallarn said. Volatility, he said, will be muted until it explodes out of the range and “isn't shackled by this effect any longer.”

Christopher Newhouse, an independent crypto derivatives trader, said there’s been strong resistance around the local highs in derivatives trading. “Even small pops in the front end of the curve are almost immediately sold off. Higher spot prices are not the only thing quickly faded by traders — volatility is as well,” he said.

Echoing Hallarn’s thoughts, Newhouse said that one potential catalyst is the spot ETF and any subsequent delays or an approval. Perhaps that could be an opportunity to short August/September volatility and go long for further dated options, he added.

Edited by Stephen Alpher.


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Lyllah Ledesma

Lyllah Ledesma is a CoinDesk Markets reporter currently based in Europe. She holds bitcoin, ether and small amounts of other crypto assets.