Ark Invest’s Bitcoin Report: Why They Bet Big On BTC’s Recovery
July 16 2024 - 6:30AM
NEWSBTC
In their latest analysis, Ark Invest’s crypto specialists Julian
Falcioni, David Puell, and Dan White, are presenting a review of
the Bitcoin market behavior and prospects, delineating the
interplay of various economic, technical, and policy-driven factors
that could shape the future of this pioneering digital currency.
Bitcoin Validates The Bullish Scenario Since early June, Bitcoin
witnessed a significant decline, dropping more than -25%. More
critically, on July 7, BTC fell beneath its 200-day moving
average—a key technical threshold. According to Ark, the dip below
the 200-day moving average was “a crucial bearish signal that often
precedes further declines unless a strong recovery ensues.”
Ultimately, Bitcoin displayed significant strength in the last few
days and Ark was right in that BTC staged a quick recovery above
the 200-day EMA, invalidating the bearish prospects. A surprising
element in June’s Bitcoin volatility was the aggressive sale of
approximately 50,000 Bitcoins by the German government. These
assets were seized from the illegal streaming site Movie2K and
gradually transferred to various exchanges for sale, starting June
19. “The influx of a large volume of bitcoins during a
traditionally low liquidity period, around the July 4th holiday,
significantly pressured the price downward,” the report notes.
Notably, this selling pressure is now gone. Related Reading:
Bitcoin Hasn’t Reached Bull Cycle Top Yet, Quant Explains Why
Despite these challenges, Bitcoin managed an impressive rally of
more than 17% in the last few days. Several indicators supported
this reversal, according to Ark. The discrepancy between the
decline in Bitcoin’s price and the lesser drop in US ETF
balances—17.3 %—suggested that Bitcoin was oversold. “This
overselling is likely driven by external shocks rather than
intrinsic market movements, pointing towards a mispricing that
could correct in the medium term,” the experts explain. Short-term
holders, typically a more speculative segment, have been realizing
losses as indicated by the sell-side risk ratio. This ratio,
calculated by dividing the sum of short-term holder profits and
losses realized on-chain by their cost bases, showed more losses
than profits, which typically precedes a short-term market
correction. Related Reading: Bitcoin Price Surges Past $63,000: The
Key Reasons June also saw significant activity from Bitcoin miners.
“Miner outflows, which often prelude market adjustments, mirrored
patterns observed around previous Bitcoin halving events, when the
reward for mining a block is halved,” says Ark. Such events
historically lead to a decreased supply and potential price
increases as market dynamics adjust to the new supply level. On the
macroeconomic front, the report notes that the US economic data
have been consistently underperforming against expectations, with
the Bloomberg US Economic Surprise Index registering the most
significant negative deviations in a decade. Yet, the Federal
Reserve has maintained a surprisingly hawkish tone, which could
influence investor sentiment and financial market stability.
Corporate America is not insulated from these challenges. Profit
margins, which peaked in 2021, are on a downward trajectory as
companies lose pricing power as Ark notes. This squeeze on profits
is prompting price cuts across various sectors, further dampening
economic outlooks. Regarding equity markets, there has been a
notable increase in market capitalization concentration, reaching
levels unseen since the Great Depression. “This concentration in
larger entities with significant cash reserves could be an early
indicator of a shifting economic landscape, which historically sees
a breakout in favor of smaller cap stocks,” the report says. At
press time, BTC traded at $63,131. Featured image created with
DALL·E, chart from TradingView.com
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