End of Cryptocurrency Season? Analysts Expect Traders to Turn Back to Bitcoin After “Pullback” to $30,000

The short-term investment case for bitcoin remains based entirely on the rotational trading outlook for the cryptocurrency market.

The bitcoin market is divided on how to interpret this week’s bitcoin price plunge. At one point on Wednesday, bitcoin depreciated more than 35%, falling to $30,000 on Coinbase.

Global media attributed the price plunge to China reiterating its stance against the crypto business and Tesla suddenly stopping using bitcoin as a payment method for its electric cars.

End of Cryptocurrency Season? Analysts Expect Traders to Turn Back to Bitcoin After "Pullback" to ,000

Traders buy on the dips, causing bitcoin to rebound immediately after testing $30,000 Source: TradingView

Nikolaos Panigirtzoglou, managing director of global market strategy at JPMorgan, further noted that inflows into publicly listed bitcoin funds continue to decline. He suspects this is a rotational investment pattern, where institutional investors liquidate their positions in the bitcoin futures market and reallocate the proceeds to build long positions in gold funds.

Panigirtzoglou adds, “It’s not clear what is driving this shift.”

“Perhaps institutional investors are fleeing bitcoin, having seen the end of bitcoin’s upward trend in the previous two quarters, and thus seeking the stability of traditional gold and away from the rapid decline in digital gold.”
He cautioned, however, that bitcoin’s momentum signal is still in positive territory. Therefore, it is too early to declare the end of the bull market.

Bitcoin dominance to rebound

A similar near-term upside pattern was suggested by Lennard Neo, head of research at crypto index fund provider Stack Funds, who mentioned a potential rotation pattern from cottage coins to bitcoin.

Lennard referred to the recent trend in the bitcoin market and the advantages of bitcoin over a large number of alternative digital assets, called the Bitcoin Dominance Index (BDI). He noted that as Bitcoin’s dominance relative to cottage coins fell from 73.5% to 40.5%, the cryptocurrency’s net market cap soared by about 40%.

End of Cryptocurrency Season? Analysts Expect Traders to Turn Back to Bitcoin After "Pullback" to ,000

Bitcoin Dominance Index (blue) vs. total cryptocurrency market cap (red) Source: Stack Funds

This suggests that many investors remain entrenched in the cryptocurrency market, focusing primarily on shifting their gains from bitcoin to cottage coins that seem optimistic in the short term. neo added that ethereum’s 180% gain this year through the end of last month was also due to a rotational investment pattern from cottage coins to bitcoin.

But now, the former Bloomberg analyst said, capital will want to return to the bitcoin market, adding.

“We believe that this rotational investment pattern has reversed as dark clouds envelop the market. As the market experiences another pullback and uncertainty increases, we expect investors to return to bitcoin. As a result, bitcoin’s dominance should rebound, further supporting bitcoin’s price in the near term.”
A nice “routine pullback”

Veteran hedge fund manager and investor Ben Miller also backed bitcoin’s bullish bias, calling its recent downside correction a “routine pullback.”

Referring to a similar price drop during bitcoin’s 2017 bull market, the former chief investment officer at Legg Mason Capital Management said, “If I like something at a higher price, then it’s a safe bet that I’ll like it more at a lower price. “

But bearish pessimism continues to offset bullish forecasts, especially as Scott Minerd, chief investment officer at Guggenheim, who had claimed bitcoin would rise to $600,000, reversed course yesterday and called bitcoin “tulipmania.

Meanwhile, Mark Haefele, chief investment officer at UBS Global Wealth Management, said bitcoin’s price is volatile and is an unreliable asset to preserve value, and Julius de Kempenaer, senior technical analyst at Stockcharts.com, also noted that Bitcoin’s recent price plunge has also weakened its prospects as a safe-haven asset.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/end-of-cryptocurrency-season-analysts-expect-traders-to-turn-back-to-bitcoin-after-pullback-to-30000/
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