Bitcoin is still stuck in a tight range as market sentiment shifts from bullish to bearish and market participants brace for a potential impact. The cryptocurrency has thrived on the possibility of a positive change in the macroeconomic landscape. Did bulls run into a trap?
At the time of writing, Bitcoin (BTC) is trading at $16,800 with sideways movement over the last 24 hours. Over the past week, the cryptocurrency held onto some gains, but there is a chance that the bullish trajectory will return to its yearly lows.
Bitcoin miners will contribute to the downward price action?
On a macro front, the US Federal Reserve (Fed) is the biggest hurdle to future Bitcoin gains. The financial institution tries to bring inflation down by raising interest rates. This monetary policy has hurt risky assets.
Fed Chair Jerome Powell hinted at monetary policy moderation, but this possibility could become less likely. Recent robust US economic data could support further rate hikes.
The market is pricing in another 75 basis points (bps) increase for December. In addition to the Fed’s tightening, the war between Russia and Ukraine is increasing market uncertainty. The conflict is taking a step back from mainstream media headlines, but hostilities are on the rise.
#RussiaPutin says threat of nuclear war is growing. Putin says Russia views nuclear weapons as a response to an attack. Says Russia’s nuclear weapons are a deterrent in conflicts. pic.twitter.com/5RMIc7UK6A
— Holger Zschaepitz (@Schuldensuehner) December 7, 2022
Locally, data from CryptoQuant was shared with the latter’s NewsBTC Bitfinex report indicates that BTC miners are “drawing a large amount of Bitcoin from their wallets”. These trades are often bearish indicators for the cryptocurrency.
Miners extract BTC to sell on the market and cover their operating costs. This sale adds to BTC’s bearish pressure. Bitfinex noted the following when sharing the chart below:
On the other hand, when the value of the indicator drops, it indicates that miners are withdrawing coins from their wallets. Such a trend could be bearish for Bitcoin as the miners could take their coins out of their wallets to sell them on exchanges. BTC exchange inflows have also picked up slightly over the past week, following a significant drop in the previous few weeks.
Other factors to consider
In addition to struggling miners, the market is seeing BTC holders sell their coins at a loss. The Spent-Out Profit Ratio (SOPR) indicator is above one, meaning that investors are capitulating and cashing out due to the current macro conditions.
Bitfinex highlighted that more retail investors are holding BTC as a positive distraction from this data. These investors are replenishing their balances as price trends move downwards. These investor classes, the report claims, are “resilient in the face of price cuts” and could eventually put a floor in BTC price.