On-chain analyst Willy Woo has detailed the recent Bitcoin market situation and the impact of macroeconomic factors on the cryptocurrency.
He pointed out that a liquidity crisis is approaching and the selling pressure from whales is increasing.
According to Woo, Bitcoin’s structural fundamentals are weakening in the current bull market. He notes that while prices are rising, the liquidity that has fueled the market for the past six months is diminishing. He describes this as a phenomenon he also observed during the 2017 cycle.
He notes that Bitcoin’s recent peak of $120,000, unlike previous all-time highs, was not supported by a higher inflow of investor capital, which could be called a “bear divergence.”
Woo said in a report that whales have sold 115,000 to 120,000 Bitcoins in the last month or two, indicating that even long-term investors are trying to profit.
Bitcoin is seen as a “harbinger of a liquidity crisis” because it’s the asset most sensitive to global liquidity. Woo believes the Fed’s four-year liquidity cycle could be affected by election cycles.
He expects a macroeconomic downturn in the coming period and predicts that Bitcoin will be affected by this situation due to its high sensitivity to liquidity.
He argues that prices could fall below $40,000, but timing the bottom is more reliable than timing the top.
The analyst argued that the altcoin market isn’t performing as well as in previous cycles. He suggested this could be due to investors being presented with alternative investment avenues, such as publicly traded companies and companies that have added Bitcoin to their balance sheets. Woo suggests that whales may be investing in these companies by selling their Bitcoin. He believes the entry of large investors like BlackRock into this space is a positive development for the asset class.
Tether’s growth has made it a significant buyer of short-term US Treasury bonds. This, analysts say, creates a situation where the US government becomes dependent on Bitcoin’s growth to find buyers for its debt. Stablecoins are also seen as an important tool for financial freedom for people in countries with unstable currencies.
While Woo doesn’t offer a specific price target for Bitcoin, he predicts it could reach the market capitalization of the global bond market or global GDP in the future, rising to a range of $10 trillion to $100 trillion. However, he notes that this journey will be a volatile one that could take a decade or more.
*This is not investment advice.