The overall cryptocurrency market is currently facing a period of uncertainty, with increasing fears of a potential new bear market. A recent evaluation by Barchart analyst Rob Isbitts outlines three key indicators that suggest a greater decline in cryptocurrency prices could be imminent.
Developing Correlations Among Cryptocurrency Prices
The report identifies significant trends that surfaced in April of the previous year, where a 50% surge followed the introduction of several spot Bitcoin exchange-traded funds (ETFs). Notably, BlackRock’s IBIT fund, which manages over $85 billion in assets, subsequently saw a drop of about 25%.
A similar trend was noticed in the early months of this year, where market fluctuations mirrored increased outflows from these investment vehicles.
Currently, the Percentage Price Oscillator (PPO)—a crucial indicator utilized by Isbitts—indicates a rising likelihood of a decline in Bitcoin’s price in the coming weeks.
Ethereum (ETH) seems to be following a similar path. Isbitts observes that while Bitcoin remains the dominant cryptocurrency, the correlation between various coins is becoming stronger over time. This increased correlation suggests that Ethereum may also see declines alongside Bitcoin.
However, for cryptocurrencies that are more distanced from Bitcoin, like Solana (SOL), there are additional risks. These coins not only face price impacts from correlation but also exhibit a higher “beta,” which can lead to sharper declines, indicating greater volatility.
For example, when Bitcoin recently fell approximately 15% from its peak, the futures-based Solana ETF (SOLZ), which has drawn in over $220 million in assets within a span of under seven months, experienced a drop of double that percentage.
Has Gold Reclaimed Its Safe Haven Status Against Bitcoin?
A recurring theme among the charts analyzed by Isbitts is the recent emergence of lower lows, signaling an urgent need for a rebound. If a recovery does not happen soon, the expert warns that the probability of further declines in crypto prices could rise.
The report also highlights a change in the perception of gold, which has historically been regarded as an “anti-US dollar asset.” The expert suggests that as global central banks accumulate gold reserves, this could alter market dynamics.
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Lately, gold has shown price movements similar to those in cryptocurrencies, indicating a potential revival of its status as a safe haven. This shift has affected crypto stocks and ETFs, with some funds displaying vulnerability as indicated by the PPO approaching a one-year high.
A long-term examination of Bitcoin by Isbitts demonstrates its inherent volatility; however, it has consistently achieved higher highs over time. While this trend may persist, the prevailing market environment suggests that any future uptrends are likely to initiate from lower price levels.
As of this moment, Bitcoin, the leading cryptocurrency in the market, has surpassed the $112,900 mark, rising 3% during the last hour of trading on Tuesday morning.
Featured image from DALL-E, chart from TradingView.com
