Ecoinometrics Warns of Further Downside

• The report highlighted that Bitcoin is trading below its long-term trend, having its 200-day moving average slip and rallies continuously plummeting.
• The last cycles suggest that 12-month realised volatility increased significantly at the time of bull markets and subsequent crashes. 

Bitcoin is still trading below the prominent $70,000 level, and a new report released by a data and research firm, Ecoinometrics, mentions that the market may not be making a base for recovery. Rather, the company claims that the cryptocurrency remains vulnerable to another downtrend, influenced by three reasons: weakening equity momentum, structural changes in the volatility profile of Bitcoin, and a Federal Reserve (Fed) that is steady. 

The report also mentions that Bitcoin now doesn’t trade in isolation. It has become highly associated with equity markets, capital flows and wider macroeconomic situations. Currently, that link is not going in its favour.

Bitcoin has so far shown the signs of weakness, equity markets are losing steam, and the Fed is keeping a neutral stance that provides some extra liquidity support. Amalgamating these factors makes the downside risks increase. 

However, Bitcoin has tried hard for its price stability in the past few weeks; the firm alerts that this does not resonate a clear bottoming pattern. Instead, it seems more like a hold within a continuing bear phase. 

Price Below its Trading Trend 

Structural headwinds are so far in place, as underscored by the company, comprising ongoing outflows from Bitcoin exchange-traded funds (ETFs) and a wider “risk-off” environment in financial markets. 

The report highlighted that Bitcoin is trading below its long-term trend, having its 200-day moving average slip and rallies continuously plummeting beneath that level. Apart from price action, the firm underscores a deeper structural shift in the behaviour of Bitcoin. 

The last cycles suggest that 12-month realised volatility increased significantly at the time of bull markets and subsequent crashes. Now, even after a complete bear-bull-bear sequence since 2022, volatility has not matched its last extremes. 

Also, peak volatility in the current cycle has been comparatively lower. This change shows who is influencing demand. ETF flows now dominate the shaping trends. These flows are normally bigger, steadier, and more systematic as compared to the retail-influenced surges. 

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