Bitcoin Remains In Bearish State Despite Recent Surge — Here’s Why

Overview

Despite a recent uptick in Bitcoin’s price, the overall outlook for the cryptocurrency remains pessimistic. An analysis by XWIN Research Japan indicates that this surge may only represent a short-term adjustment rather than a genuine recovery, influenced by broader macroeconomic factors.

Recent Price Movement

Bitcoin has shown a swift recovery in its price, but this rebound occurs within a context that suggests a weak trend overall. Recent on-chain evaluations highlight that macroeconomic conditions are significantly affecting Bitcoin’s market dynamics. According to XWIN Research Japan, the price recovery is likely in a “post-rebound adjustment” phase, signaling that a full-scale recovery is not yet underway.

One of the key factors impacting this situation is the recent rate increment by the Bank of Japan. The rate was increased by 0.75%, but this change has been largely priced into the market, resulting in a continued weakness of the Japanese yen. Historically, a weak yen would typically encourage Japanese investors to engage in ‘yen-funded carry trades,’ where they borrow yen to invest in higher-yielding assets, including cryptocurrencies. However, the current market conditions are deviating from this historical trend.

The research group has observed a decline in the Bitcoin: Estimated Leverage Ratio metric, which measures the leverage traders are using in the futures market relative to the amount of Bitcoin held on exchanges. This decline indicates that there has been no recovery in leverage, even amidst Bitcoin’s recent price fluctuations. The findings suggest that risk-taking driven by yen-funded carry trades remains limited rather than increasing.

Market Sentiment

Another critical indicator of market sentiment is the Coinbase Premium Index, which assesses the price difference between Bitcoin on Coinbase and global exchange averages. While this index has improved from negative levels to more moderate ones, it primarily signals that selling pressure is easing rather than indicating a robust buying interest. Moreover, the data suggests that U.S. spot investors are still hesitant to enter the market.

XWIN Research Japan concludes that the ongoing weakness of the yen, combined with the lack of significant spot buying, implies that the current recovery does not reflect a structural uptrend. However, a potential shift in this narrative could occur if the Coinbase Premium Index moves into positive territory alongside a price increase, without a corresponding rise in leverage. Such a scenario would indicate a demand-driven accumulation, which could alter the current outlook.

From author

The analysis from XWIN Research Japan underscores the complexities of the Bitcoin market in light of broader economic conditions. While recent price movements may appear positive, they are not necessarily indicative of a sustainable recovery. The interplay between macroeconomic factors, investor sentiment, and market metrics will be crucial in determining Bitcoin’s future trajectory.

Impact on the crypto market

• The recent Bitcoin price surge is viewed as a temporary adjustment rather than a sign of a long-term recovery.
• Macroeconomic factors, particularly the weak Japanese yen, are significantly influencing investor behavior in the cryptocurrency market.
• A decline in the estimated leverage ratio indicates limited risk-taking among traders, suggesting a cautious market sentiment.
• The Coinbase Premium Index reflects easing selling pressure but also highlights a lack of interest from U.S. spot investors.
• Future market dynamics may change if both the Coinbase Premium Index and Bitcoin prices rise without increased leverage, signaling stronger demand.
• Overall, the current conditions suggest a bearish outlook for Bitcoin despite short-term price fluctuations.