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- US-Iran Agreement Becomes the Market’s Main Catalyst
- On-Chain Metrics Are Different
- Institutional Demand is Still Largely Absent
- Can Bitcoin Hold Its Ground Above $67,000?
- Conclusion
- Glossary
- Frequently Asked Questions About Bitcoin Recovery
- Why is the Bitcoin recovery tied up with the US-Iran deal?
- What is Bitcoin’s current momentum reading?
- What is On-Balance Volume (OBV)?
- Could Bitcoin retest recent lows?
- References
Bitcoin recently bounced back above $67,000 but analysts warn that the latest round of gains is looking shaky. While a newly announced US-Iran peace deal has sent risk assets soaring and helped Bitcoin in the process, blockchain data shows the overall momentum is still not convincing. In fact, the concern is that price has recovered faster than investor participation.
Nick Ruck at LVRG Research says this recent Bitcoin recovery isn’t looking sustainable.
“Momentum remains weak,” Ruck told sources. “with declining volume and stagnant on-chain metrics indicating that the recovery lacks conviction and could quickly fade,”
Ruck is putting out a warning as Bitcoin retraces some of the sharp losses it saw back in early June when it briefly dipped below $60,000 only to bounce back up to around $67,000.
US-Iran Agreement Becomes the Market’s Main Catalyst
The latest Bitcoin recovery has been closely tied to developments happening outside the crypto world.
After US President Donald Trump dropped an announcement that the US and Iran have reached a peace deal aimed at ending months of tensions, the markets rallied. Stocks surged, oil prices retreated and Bitcoin also joined the rally as investors responded to the reduced uncertainty.
The proposed deal is expected to be formally signed later this week and includes reopening the Strait of Hormuz, one of the world’s most important energy trade routes, while initiating a 60-day negotiation period covering Iran’s nuclear program and potential sanctions relief.
However, this optimism may still prove fragile. Ruck reckons that if the deal falls apart, the reduced tension could cause another wave of volatility.
“It may initially find bids as a hedge asset before broader risk-off flows push it toward key support zones,” he said, going on to warn that it is still macro-economic and geopolitical events that drive crypto price action.
On-Chain Metrics Are Different
While Bitcoin recovery seems to be happening now, Swissblock’s latest analysis indicates that market participation remains unusually weak.
The firm’s Bitcoin Momentum indicator is currently sitting at -1 which is a weak sign for price strength. On-Balance Volume (OBV) which is a metric used to track buying and selling pressure has also fallen to -1.7m, one of the lowest readings for years.
Both of these key metrics are still in the red despite Bitcoin reclaiming $67,000.
According to Swissblock, bear markets usually follow a predictable pattern: momentum deteriorates first, trading participation takes a hit next -and then prices eventually start moving lower.
The company goes on to say that stronger confirmation of a durable Bitcoin recovery would require both of these indicators to flip back to positive.
So until that happens, the possibility of another test of recent lows is still very much open.
Institutional Demand is Still Largely Absent
Another challenge for Bitcoin recovery is the lack of strong institutional participation.
Recent reports are showing that US spot Bitcoin ETFs have seen multiple weeks of net outflows in a row despite the recent rebound. Analysts note that even though geopolitical fears are receding, institutional demand is remaining subdued.
Bitcoin has responded favorably to Geopolitical headlines, however big investors have not returned with the same enthusiasm seen during previous rallies. Some analysts view this as evidence that the current Bitcoin recovery is being driven a lot more by short-term sentiment than fresh capital entering the market.
With the Federal Reserve’s June 16-17 meeting coming up, investors are waiting for guidance on interest rates and monetary policy which is another factor that could influence risk appetite across financial markets.
Can Bitcoin Hold Its Ground Above $67,000?
Technical analysts are split. Some market watchers think that easing geopolitical tensions could help Bitcoin challenge the $68,000-$69,000 area in the short term.
Others on the other hand are saying that without stronger volumes, healthier on chain participation, and more institutional investors coming in, the rally could lose steam quickly.
Early Tuesday trading already showed signs of hesitation, with Bitcoin slipping back around $66,000 after reaching Monday’s intraday highs.
Right now, Bitcoin recovery is still hanging by a thread and very dependent on external factors like the success of the proposed US-Iran agreement and macroeconomic conditions.
Conclusion
Getting back above $67,000 has given the market an improved sentiment, but data is still suggesting caution. Weak momentum readings, low participation metrics and subdued institutional demand all point to the fact that this recent Bitcoin recovery still doesn’t have a solid foundation.
The market is still waiting to see how the proposed US-Iran peace deal pans out, the decisions of the Federal Reserve and investor confidence over the coming weeks.
Glossary
Bitcoin Recovery: a rebound in the price of Bitcoin after the market has had a fall.
On-Balance Volume (OBV): a technical indicator that is used to measure how much buying and selling is going on.
Risk-On Sentiment: a market behavior where investors favor risk assets like stocks and crypto.
Spot Bitcoin ETF: an exchange traded fund that directly holds Bitcoins
Momentum Indicator: a metric that is use to see how strong and sustainable a price trend is.
Frequently Asked Questions About Bitcoin Recovery
Why is the Bitcoin recovery tied up with the US-Iran deal?
The agreement reduced the geopolitical uncertainty, improved investor appetite for risk and had a rallying effect across the whole of the stock and crypto markets
What is Bitcoin’s current momentum reading?
According to Swissblock, the momentum indicator is a -1, which suggests that the recent price bounce might not last.
What is On-Balance Volume (OBV)?
OBV is a technical indicator that measures buying and selling pressure by combining trading volume with price direction.
Could Bitcoin retest recent lows?
Analysts say another retest is possible, but only unless the momentum and participation indicators start to move back into positive territory.
References
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