Bitcoin has reached an important level of resistance as it was finally able to break above its downside price action. The cryptocurrency still faces several headwinds if it seeks to reclaim previous highs, but some clues point to a possible short-term relief.
Related Reading | Ethereum Single-Day Liquidation Hits Three-Year High as Price Breaks $1,900
At the time of writing, the benchmark cryptocurrency is trading at $31,400 with a 5% gain over the past 24 hours and a 6% gain over the past week. This past week has been one of the best trading sessions for BTC price and suggests a possible change in market sentiment.
Meltem Demirors, chief strategy officer at investment firm CoinShares, recently Shared new data about general sentiment across the market. Sentiment favored the bears as the price of BTC fell to $24,000.
However, CoinShares reported an increase in net inflows to publicly traded bitcoin products. These investment vehicles saw an inflow of $126 million in the last week alone and suggest investors are turning more quickly.
(…) With 2 consecutive weeks of net inflows across all crypto products, investors are buying dips.
This uptrend in BTC market sentiment is in contrast to the one recorded for Ethereum (ETH). The second crypto by market cap is recording serious losses.
Demirors said the uncertainty surrounding the macro-economic outlook and the upcoming deployment of “The Merge” has caused investors to turn to bitcoin. This is reflected in ETH investment products, which have taken their 9. have enteredth Consistent weeks of outflow.
“The Merge” is the event that combines Ethereum’s execution layer, ETH 1.0, with its consensus layer, ETH 2.0. The latter will be backed by a proof-of-stake blockchain or “beacon chain”. The program has been delayed on several occasions but it seems that progress is being made.
Bitcoin to see some short-term relief?
Overall, CoinShares noted that the digital asset investment offering saw an inflow of $100 million last week. The positive inflows have not translated into price action as most cryptocurrencies remain range bound.
Additional data provided by Demirors sheds light on some movement in the option area. Market participants took calls (buy) positions as inflows increased, but have since turned to “defensive hedging with puts in the latter part of the week”.
These factors could contribute to a short-term relief for bitcoin. Economist Michael van de Pope supports This thesis. As seen below, he expects BTC price to retest the resistance at $34,000 if BTC is able to maintain its current momentum.
However, the macro conditions for bitcoin and riskier assets still look unfavourable. As NewsBTC reported, any new narrative that points to a worldwide economic slowdown and the like could be playing in favor of cryptocurrencies and risk-averse assets.
Related Reading | Bitcoin Bullish Signal: 1k-10k BTC Holders Are Buying Lately
This could force the US Federal Reserve to slow its monetary tightening and provide at-risk assets with more breathing room.