Bitcoin - Summer Doldrums Are Approaching

Bitcoin, the world’s leading cryptocurrency, is entering a period historically marked by reduced trading activity and price stagnation, often referred to as the “summer doldrums.” This seasonal weakness, typically observed from early June to early October, has been characterized by lower trading volumes and diminished investor interest. Past performance suggest that this period may result in a sluggish, sideways market movement rather than dramatic price declines, as Bitcoin consolidates before potentially resuming its upward trajectory in the fall. Despite the current high-interest rate environment and global economic uncertainties, Bitcoin’s resilience as a decentralized, hard money asset continues to attract attention, even as it navigates this traditionally tepid phase. Bitcoin – Summer doldrums are approaching.

Review

Around six weeks ago, we predicted “Recovery attempt fails, summer doldrums loom” for Bitcoin and expected a gradual transition into the summer correction. Driven by speculation about a possible Etherum spot ETF in the USA, Bitcoin prices were initially able to recover somewhat more significantly. However, with highs of USD 71,958 on May 21st and USD 71,949 on June 7th, the all-time high of USD 73,793 from March 14th was missed. Instead, a double top just below USD 72,000 remained!

In the next step, Bitcoin prices got stuck at the psychological mark of USD 70,000 and came under more significant pressure over the last 11 days. Bitcoin is now only trading at USD 63,685, almost 12% below its all-time high. Overall, we see our rather skeptical attitude confirmed.

Record inflows into Bitcoin spot ETFs in early June

In the first week of June, Bitcoin spot ETFs recorded record inflows of over USD 800 million in just two trading days. The Grayscale Bitcoin Trust (GBTC) achieved the highest daily volume of all Bitcoin ETFs on June 5th at USD 425 million. Despite the increased institutional demand for the spot ETFs, daily inflows have recently fallen again. Between June 12th and 16th, inflows averaged only USD 120 million per day, which corresponds to a decline of over 80%. Obviously, the demand for Bitcoin spot ETFs remains extremely volatile.

Sell in May and go away

In view of the strong rallies in all sectors of the financial markets, we have repeatedly pointed out since late May that Bitcoin and stock markets are strongly correlated and that markets are expected to consolidate sideways or correct or even correct strongly until late summer or autumn. The opposition we received from both the Bitcoin maximalist camp and the gold bug camp to our completely logical “summer lull forecast” was harsh and intense. This confirms our assumption all the more that we should act with extreme caution over the next few months.

Ethereum spot ETFs in the starting blocks

In the meantime, the US Securities and Exchange Commission (SEC) has permanently closed its investigation into Ethereum, paving the way for an Ethereum exchange-traded fund (ETF). Trading could begin within the next two to three weeks. Crypto enthusiasts expect this to be the starting signal for a major rally among altcoins (“altseason”).

In the medium term, the start of trading in Ethereum spot ETFs is likely to have a positive impact on many altcoins. Ethereum (ETH-USD) itself in particular is likely to benefit from the increased legitimacy and attention. Likewise, Ethereum Layer 2 solutions such as Optimism (OP-USD) and Arbitrum (ARB-USD) could gain importance as integral parts of the Ethereum ecosystem. In addition, DeFi projects such as Uniswap (UNI-USD) or Aave (AAVE-USD), which are built on the Ethereum Virtual Machine (EVM), should be legitimized by ETF approval and gradually receive new capital inflows. EVM-compatible projects and blockchains such as Avalanche or Polygon are also closely linked to Ethereum and could gain more attention again, too.

In general, the approval of Ethereum ETFs should give the entire crypto industry more legitimacy and, in the medium term, new wings for the next stage in this bull market. However, the hype is unlikely to be as extreme as when the Bitcoin spot ETFs started trading, and not all altcoins will certainly benefit from it. In particular, closed blockchain systems with no connection to Ethereum, as well as outdated token projects or non-updated technologies, as well as projects with insider dumping and poor tokenomics will fall by the wayside.

Technical Analysis for Bitcoin in US-Dollar

Bitcoin Weekly Chart – Sell signals continue to increase

Bitcoin in USD, weekly chart as of June 21st, 2024. Source: Tradingview. June 21st, 2024, Bitcoin - Summer doldrums are approaching.

Bitcoin in USD, weekly chart as of June 21st, 2024. Source: Tradingview

More than three months have already passed since the new all-time high from March 14th, 2024 at USD 73,794. Instead of the continuation of the rally that many had hoped for, Bitcoin is meandering through its weekly chart slowly and without a clear trend. So far, it has been a sideways consolidation at a high level.

However, the sell signal from the weekly stochastic oscillator has recently become somewhat more solid. The lower Bollinger Band (USD 51,748) initially caught up quickly with the current price action, but progress has now slowed due to the long sideways phase. Nevertheless, prices below USD 50,000 have become quite unlikely due to this strong support.

Overall, the weekly chart is neutral. As part of the potential cup-and-handle formation, however, one should continue to plan for a pullback towards the 38.2% retracement (USD 51,518) as a precaution. If, on the other hand, the consolidation or correction only takes place in the upper part of the uptrend channel, the maximum downside risk would be ​​towards around USD 55,000 USD over the summer months. On the upside, a weekly closing price above USD 74,000 is still needed to clearly and unambiguously end this correction.

Bitcoin Daily Chart – On the way to meet the 200-day moving average

Bitcoin in USD, daily chart as of June 21st, 2024. Source: Tradingview. June 21st, 2024, Bitcoin - Summer doldrums are approaching.

Bitcoin in USD, daily chart as of June 21st, 2024. Source: Tradingview

On the daily chart, Bitcoin is currently trading more or less in the middle of its sideways zone, which has been causing a tough back and forth in the range between around USD 60,000 and USD 70,000 for three months. A decision has not yet been made, hence the rapidly rising 200-day moving average (USD 57,274) has now almost caught up with the current price action. This provides additional support for consolidation at a high level, while at the same time a reunion with this important average line is looming.

Meanwhile, the ongoing pullback has led to an oversold stochastic oscillator. The remaining short-term downside risk has therefore probably become manageable. In addition, Bitcoin is likely to start a new recovery attempt soon due to this oversold situation.

Overall, the daily chart is bearish, but increasingly oversold. A recovery or reaction to the sell-off could therefore start soon and might push prices back towards the resistance zone of around USD 70,000. After that, probably in mid-summer, we should anticipate the reunion with the rising 200-day moving average somewhere in the range between approx. USD 60,000 and 65,000.

Sentiment Bitcoin – Optimism still too high

Crypto Fear & Greed Index, as of June 18th, 2024. Source: Lookintobitcoin. June 21st, 2024, Bitcoin - Summer doldrums are approaching.

Crypto Fear & Greed Index, as of June 18th, 2024. Source: Lookintobitcoin

The “Crypto Fear & Greed Index” is at 74 out of 100 points, only slightly below its March 14th high of 88. Despite the pullback and the almost three-month, tough consolidation at a high level, sentiment has not yet been sustainably cooled down.

CMC Crypto Fear & Greed Index as of June 18th, 2024. Source: Coinmarketcap. June 21st, 2024, Bitcoin - Summer doldrums are approaching.

CMC Crypto Fear & Greed Index as of June 18th, 2024. Source: Coinmarketcap

The “CMC Crypto Fear & Greed Index” from CoinMarketCap, on the other hand, is currently measuring a somewhat clearer progress towards a neutral sentiment. In our opinion, this would be the minimum requirement for the start of a new and sustainable uptrend in the crypto sector. From a contrarian and psychological point of view, however, a real panic would be the best thing. Obviously, there is no sign of that (yet). Only the smaller altcoins have suffered greatly in recent weeks.

Overall, sentiment is still too optimistic. Either another big wave of selling will be needed or the sideways stretching torture will have to drag on for much longer. We expect a mixture of both until September. Only then will the potential for surprises be to the upside again.

Seasonality Bitcoin – Seasonality extremely unfavorable until the end of September

Seasonality for Bitcoin, as of May 3rd, 2024. Source: Seasonax

Seasonality for Bitcoin, as of May 3rd, 2024. Source: Seasonax

According to seasonal statistics, Bitcoin is already in its worst phase of the year. On average over the last 14 years, Bitcoin prices have mostly fallen sharply until the end of September or the beginning of October. In addition, there is a strong correlation with the stock markets, for which unfavorable seasonal trends (“Sell in May”) have also been active since the beginning of May.

In summary, seasonality is extremely unfavorable until at least the end of September. The seasonal traffic light is dark red.

Sound Money: Bitcoin vs. Gold, Bitcoin – Summer doldrums loom.

Bitcoin/Gold-Ratio, weekly chart as of June 21st, 2024, 2024. Source: Tradingview. June 21st, 2024, Bitcoin - Summer doldrums are approaching.

Bitcoin/Gold-Ratio, weekly chart as of June 21st, 2024, 2024. Source: Tradingview

With prices of around USD 64,000 for one Bitcoin and around USD 2,322 for one troy ounce of gold, you currently have to pay around 27.5 ounces of gold for one Bitcoin. Put another way, one ounce of gold currently costs around 0.036 Bitcoin.

After the Bitcoin/Gold-Ratio experienced a sharp decline from 34 to 25 over a month and a half starting in mid-March, it rebounded from 25 to 30 during May. However, since June 9th, gold has once again outperformed Bitcoin.

Overall, the overarching correction that began in mid-March is not yet over. In the short term, however, the Bitcoin/Gold-Ratio is increasingly oversold. A recovery in favor of Bitcoin therefore seems likely in the near future. Over the coming summer months, the correction is expected to continue to around 24, before the overarching uptrend takes over again in the fall.


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