Bitcoin continues to be the crypto market leader, even if its price performance in 2022 so far has been one to forget. Sellers have been the ones in control over the order flow and the BTC price reached levels not seen since November 2020. Although bears seem to have cooled down since mid-June this year, the broad picture remains challenging, raising more questions than answers for traders and investors.
In prior bear markets, the recovery was led by Bitcoin, as most investors saw it as the safest of all cryptos. This time around, it was Ether that managed to outperform BTC price-wise, suggesting that the next bull market might be one during which Bitcoin loses more market dominance.
Measured from top tick to bottom tick, Bitcoin lost 74.33% of its value between November 2021 and June 2022. The end of accommodative monetary policy, a rising US Dollar, and a diminished appetite for volatile assets acted as a headwind for BTC, according to analysts at SquaredFinancial, a leading online brokerage.
During such periods, pessimism tends to grow and investors tend to lose faith in Bitcoin. This naturally leads to a rush to sell, and from that point, a snowball effect is inevitable. Despite the impulsive drop, however, a recurring pattern can be noticed on larger timeframes.
More specifically, the Bitcoin selloff stalled around the weekly 200 SMA (simple moving average), and that’s also where selling was capped in March 2020, December 2018, and July 2015. The point of maximum pessimism was actually a good entry point for confident buyers, but the price performance since mid-June has been tricky.
Buying interest is still sluggish
Although a 39% jump in valuation should not be overlooked, it seems rather strange to see Bitcoin underperforming many of its peers. The price is now retreating lower, after July was marked as the best month of 2022 for BTC in terms of gains.
Still, the price action performance has been choppy, given each bounce was followed by strong selling interest. Buyers entered at higher levels, generating temporary higher highs, yet the pace of the bullish move failed to gain momentum.
Tech stocks have recovered substantially, the US Dollar eased from the highs, and commodities, except for the energy space, dropped, yet none of the above were treated as a strong incentive to buy cryptocurrencies such as Bitcoin.
How can traders navigate this landscape?
Despite the fact that other risk assets have recovered, crypto remains the most volatile option and market participants need a better understanding before increasing exposure. In an environment where the price is fluctuating in narrow ranges, trading crypto using CFDs (contracts for difference) represents a viable alternative.
Brokers like SquaredFinancial have expanded their offering to include crypto CFDs and now it’s convenient to trade on short-term price movements. Until the price of Bitcoin displays an impulsive upside bias, buying and holding tokens simply doesn’t seem to meet investors’ expectations.
The crypto market continues to be a dominant one, but taking advantage of its performance must be done in a manner flexible enough to adapt when market conditions are changing. There will be periods like this when volatility will compress. At some point in the future, a new catalyzer will emerge and BTC will get more active.