Bitcoin Drops 6% Below $80,000 Mark, Bearish Trend Looms

Bitcoin, the leading cryptocurrency, has been experiencing a downward trend, prompting industry experts to analyze the factors influencing its trajectory. According to Ki Young Ju, CEO of a market intelligence firm, the current Bitcoin bull cycle may be nearing its end. This conclusion is based on the Realized Cap metric, which measures the actual capital entering the Bitcoin market through on-chain activity.

The Realized Cap metric works by calculating the average cost basis for each wallet and multiplying it by the amount of Bitcoin held. This provides a total Realized Cap, reflecting the genuine capital entering the Bitcoin ecosystem. Unlike market capitalization, which is determined by the last traded price on exchanges, Realized Cap offers a more accurate representation of the capital invested in Bitcoin.

Ju clarifies a common misconception: a small purchase, such as $10 worth of Bitcoin, does not increase market capitalization by that amount. Instead, prices are influenced by the balance of buy and sell orders on the order book. Low sell pressure can cause even modest buys to significantly elevate prices and market cap. This was demonstrated by microstrategy, which issued convertible bonds to acquire Bitcoin, inflating the paper value of its holdings beyond the initial capital deployed.

Currently, Bitcoin is facing challenges, having dropped below the key $80,000 mark. High sell pressure can prevent substantial purchases from affecting prices, as seen when Bitcoin traded near its all-time high of nearly $100,000. Despite massive trading volumes, the price remained stagnant. Ju notes that if Realized Cap is increasing but market cap is flat or declining, it signals a bearish trend. This indicates that while capital is entering the market, it is not translating into price appreciation—a hallmark of a bear market.

Conversely, if market capitalization is rising while Realized Cap remains stable, it suggests that even minimal new investment is driving prices up, indicative of a bull market. Currently, data suggests that Bitcoin is experiencing the former scenario: capital is flowing in, but prices are not responding positively. Historically, significant market reversals require at least six months to manifest, making a short-term rally seem unlikely.

Adding to the complexity, market expert Ali Martinez has identified key resistance levels that Bitcoin must overcome to regain upward momentum. Notably, there is a major resistance cluster at $87,000, where the 50-day moving average, 200-day moving average, and a descending trendline from the all-time high converge. For Bitcoin to resume its upward trajectory, it must break through critical resistance points at $85,470 and $92,950. Additionally, support at $80,450 remains vital; failure to hold this level could lead to further declines.

As of now, the leading cryptocurrency trades at $78,379, recording a 6% decline on Sunday. The daily chart shows Bitcoin’s price drop below the key $80,000 mark, highlighting the current challenges faced by the cryptocurrency. The analysis suggests that Bitcoin is in a bearish trend, with significant resistance levels and historical data indicating a prolonged period before a potential market reversal.

Ask Aime: What factors contribute to Bitcoin's current downward trend?