For the third week, Bitcoin (BTC) remains locked in the price range between $90,000 and $100,000, punctuated only by a brief rally to six digits on December 5th.
This indecisive price movement may have left traders feeling uninspired, and there are two main reasons for capping upside.
First, the inflow of liquidity into the crypto market through channels such as spot exchange-traded funds (ETFs) has slowed significantly, and the bullish momentum is beginning to fade.
The weekly rate of change in the so-called Market Liquidity Impulse Index, which tracks stablecoin minting, BTC ETF inflows, and changes in futures market parameters, is $7 billion, up from a high of more than $15 billion seen early last month. It is said that it has become less than half. Data tracked by 10x Research.
10x Research founder Markus Thielen said in a note to clients on Wednesday that “part of the reason Bitcoin has struggled to sustain above $100,000 is due to a lack of liquidity growth. “This may be partially explained by a slowdown.”
Liquidity indicators have cut down recent highs and are bearishly diverging from BTC price.
Stablecoins are cryptocurrencies pegged to an external reference, such as the US dollar, and are widely used to fund the purchase of cryptocurrencies. ETFs, on the other hand, are the preferred investment vehicle for those looking to gain exposure to cryptocurrencies without owning them. The same is true for CME cash-settled futures.
Another reason, overlooked by most experts, is that the upward trend in the stock price of Nvidia (NVDA), the world's largest semiconductor manufacturer, is slowing. Since the debut of ChatGPT in late 2022, NVDA has emerged as a leader in AI and risk assets in general.
BTC and NVDA bottomed out in late 2022 and have enjoyed a strong positive correlation since then, with the exception of the summer when BTC was unable to track NVDA's rise due to oversupply concerns. As of this writing, the three-month correlation between the two was 0.6.
Analysts at TheMarketEar believe that BTC has surged from $70,000 to $100,000 after the US presidential election, catching up with NVDA.
“Same psychology. Winners like winners. BTC has 'caught up' to NVDA. They have few fundamentals in common, but are driven by similar psychology,” analysts at TheMarketEar said in a note to clients, adding that BTC has 'caught up' to NVDA. is one of the few stocks that has outperformed BTC this year and over the past five years, he added.
According to data source TradingView, BTC is up 130% this year, while NVDA is up 172%.
However, NVDA's uptrend has lost momentum since mid-November, and the price is now signaling a reversal pattern of across-the-board weakness. Additionally, according to data source Market Chameleon, the one-year put-call skew is now with calls trading equally as puts, with neutral sentiment in contrast to the strong call (bullish) bias earlier this year. It is said that it shows ment.
However, as noted in Tuesday's edition of Crypto Daybook Americas, bullish excesses are being shut out of the crypto market. BTC could re-challenge the $100,000 level as the market normalizes to healthier leverage levels, but the sustainability of the breakout will depend on liquidity inflows and broader risk sentiment There is a high possibility that it will be done.
