Crypto

Crypto Speculation Index Falls Below 10%, Bitcoin Resets at $58K

Crypto Speculation Index Drops to 10%, Bitcoin Stabilizes at $57,700 Amid Reduced Selling Pressure

By Athena Xu

7/11, 07:16 EDT
Bitcoin / U.S. dollar
Bitcoin / US Dollar
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Key Takeaway

  • Capriole Investment's crypto speculation index has dropped below 10%, down from nearly 60% in January, indicating reduced speculative excess.
  • Bitcoin prices have cooled to $58,000 from record highs above $70,000 in Q1, suggesting a market reset.
  • Historically, a sub-10% speculation index has preceded sharp bitcoin rallies, potentially signaling renewed bullish momentum.

Speculative Excesses Dissipate

The crypto market is showing signs of stabilization after a period of speculative excesses, particularly in the altcoin sector. According to Capriole Investment's crypto speculation index, the percentage of altcoins with 90-day returns greater than Bitcoin (BTC) has dropped below 10%, a significant decline from nearly 60% in January. This index is a key indicator of speculative activity, and its current level suggests that the frothiness observed in the first quarter has largely dissipated. Bitcoin, which reached record highs above $70,000 in the first quarter, has since cooled to $58,000. The reduction in speculative activity is seen as a healthy correction, realigning asset prices with fundamentals and setting the stage for potential renewed bullish action in Bitcoin.

Bitcoin at a Crucial Stage

Bitcoin is currently trading at $57,700, having bounced from last week's low of $53,600. Despite this recovery, Bitcoin remains in a technical downtrend from its March high of $73,800, marked by consecutive lower highs at $71,300 and $63,900. On-chain data from CryptoQuant indicates that Bitcoin is at a pivotal point, with the profit and loss index hovering around its 365-day moving average. Previous crossovers to the downside have preceded significant declines, as seen in May and November 2021. Additionally, CryptoQuant's bull-bear market cycle indicator is nearing a critical level that could signal a descent into a bear market. However, there are bullish signs as well, such as Bitcoin whales increasing their holdings by 6.3% over the past month, the fastest accumulation rate since April 2023. Furthermore, Germany's aggressive selling of seized BTC appears to be nearing its end, potentially reducing selling pressure.

Overblown Concerns on Selling Pressure

The recent 15% decline in Bitcoin's price has been attributed to selling pressure from various sources, including Bitcoin mining operators, Mt. Gox refunds, and the German state of Saxony. However, Greg Cipolaro, head of research at NYDIG, argues that these concerns are overstated. "While emotions and psychology may rule over the short-term, our analysis suggests that the price impact from potential selling may be overblown," Cipolaro wrote. He noted that even if all three entities were to sell their combined 375,000 BTC at once, the price decline observed was deeper than what would be expected based on traditional market indicators like Bloomberg's transaction cost analysis (TCA). Cipolaro also pointed out that reports of miners capitulating and selling their BTC en masse are inaccurate. NYDIG's data shows that publicly listed mining companies actually increased their Bitcoin holdings in June, and while BTC sales did pick up slightly, they remained below levels seen earlier this year and last year.