Bitcoin
Why Bitcoin Holders May Need to Wait a Little Longer for $70K
- Buying momentum on Coinbase has slowed, suggesting a further decline for Bitcoin.
- The negative Sharpe Ratio indicated that BTC may not produce good gains in the short term.
Bitcoin [BTC] may experience another downturn, according to signals from the Coinbase Premium Index.
This index shows the level of buying pressure among investors in the US – especially since the country has a large number of Bitcoin holders.
High premium values indicate an increase in buying pressure. On the other hand, a low Coinbase Premium Index reading suggests an increase in sales.
The big players are letting go
According to AMBCrypto analysis using CryptoQuant, the ratio was -0.050 at press time. This was a sign that many US Bitcoin holders were selling instead of accumulating.
Source: CryptoQuant
Signal Quant, wallet profiler and author of CryptoQuant commented on trend.
According to the handle, the state of this leading indicator means that Bitcoin price could see another correction before a significant bounce.
“The current trend of Coinbase Premium is positive, close to zero. Therefore, if the historical pattern repeats itself, we may have a better chance of success if we wait a little longer and invest in the recovery after the trend turns negative.”
At press time, the price of BTC was $62,785 – an increase of 2.94% in the last 24 hours. Coming from the above analysis, this price increase may not last long.
But if users in the US start buying in large numbers, this pessimistic outlook could be invalidated. However, AMBCrypto considered other metrics to confirm that a rise beyond Bitcoin’s current peak could take longer.
The risky season has arrived
To do this, we look at the Sharpe ratio. In simple terms, this metric indicates whether or not you should take risks with an investment.
If the Sharpe Ratio is positive, it means that the potential return on investment (ROI) can be large compared to the risk involved.
Additionally, a negative Sharpe Ratio indicates that the potential reward may not be worth the risk. This was the case for Bitcoin, as blockchain analysis tool Messari showed the reading to be -2.22.
Source: Messari
However, BTC returns may begin to increase once the metric reaches the zero midpoint. Meanwhile, Bitcoin’s total profit offering was 87.03%.
For a significant jump to occur, the percentage may need to decrease. It is a reasonable point to fall to could be 78.20%. This was the same source of profit that Bitcoin had before recovering in March.
If supply falls to a similar level, BTC could begin a run that could take it above $75,000.
Source: Santíment
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Furthermore, one-day circulation dropped to 17,600, indicating that the number of coins involved in transactions has decreased.
If circulation increases, Bitcoin could begin another trip up the charts.