Cryptocurrency investors have found something to cheer about amid the recent slump in digital tokens: the asset class held up better than anything else in the third quarter.
Cryptocurrency investors have found something to cheer about amid the recent slump in digital tokens: the asset class held up better than anything else in the third quarter. However, the hunt for the bottom continues as long-term stockholders cling to expectations that there is more pain ahead – and retail investors remain on the sidelines.
Even with the narrative that the cryptocurrency is on a tight hold in the July-September period, the mood remains poor. While about 83,500 new digital wallets come online daily, this is a low level for the 2020-2022 cycle, according to data compiled by strategists at Glassnode.
Meanwhile, wealth held by “mature currencies” has reached an all-time high, the researcher said, as legacy investors refuse to spend it amid market turmoil. And according to Glassnode, the group of investors who ‘flood in’ through thick and thin – that is, those who remain loyal even in tough times – have remained ‘steadfast’, saying they may be heading for the ‘storms ahead’.
That’s the problem with Bitcoin and other cryptocurrencies now – the group of retail-type investors that fueled much of the massive price surge in the past year has been out of action. Some market watchers say that with interested investors waiting for things to happen, the question remains whether – or when – individual investors will make a return.
“The overall price should work better, and once that happens the retail investor will get excited again. We definitely don’t have that at the moment because we are stuck in a range,” said Matt Malley, chief market strategist at Miller Tabak & Co.
The point of contention is that Bitcoin needs to find a bottom amid a sell-off that has brought it down 60% this year. Many analysts say that if US stocks hit the floor, digital tokens could happen as well, although there is little consensus as to when that will happen. Others argue that once the dollar begins to weaken, Bitcoin may be able to collapse as well.
Whatever the case, interest in cryptocurrencies has waned in recent months. Google Trends shows that the general public has been much less interested in icons. Bitcoin activity on the chain has been declining throughout the year, according to a note from researcher Arcane Jaran Mellerud.
“If it is a risky asset, as many including myself have suggested, picking a bottom in BTC is tantamount to picking a bottom in stocks,” said Mark Chandler, chief market strategist at Bannockburn Global Forex, adding that “the crash has dampened enthusiasm among the people he is talking to.” .
With investors waiting for things to happen until Bitcoin and other cryptocurrencies start to recover, ETF flows have also remained muted. Funds flowing from crypto-related funds slowed in the third quarter, and some analysts say most of the fleeing investors occurred in the second quarter. Now they are just waiting for things.
There are many who say that a price recovery is still a long way off. This is the view of Ashley Orth, chief investment strategist at Invesco, who says that cryptocurrencies are valued not by their own characteristics but by the prevailing macro environment.
“Next summer for cryptocurrencies is probably when we will see the peak of central bank tightening and the beginning of policy easing,” Orth said. “To the extent that you believe in the long-term potential of cryptocurrency, now may be a buying opportunity — if you can handle the volatility.”
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