The analysts, Alkesh Shah and Andrew Moss, wrote that low belief, restricted catalysts, and achieving better results leave the digital asset sector stuck in a trading range with a challenging macro backdrop, likely capping digital assets upside.
The other reasons accounting for restricted growth can be the cost of production, fees of exchanges, and chances of attracting specific regulation by the government. These are some of the other reasons which may count, but the market suggested some more reasons after analysis.
This includes that the holders are increasing their holdings rather than trading or moving it around. And also, the prices are stagnant. This signals the lack of liquidity in the market. This can result in price swings.
Bitcoin Price Remains Stagnant
The best example in front is Bitcoin. The BTC prize remains stagnant at $17000. It can be said that it has reached the saturation point. And maybe, most of the people interested, have already bought it.
The bank had discussions with the client. This discussion clarifies that hedge funds are returning to token trading. It means the fund, which is invested in commodities, real estate, art, etc., is coming back to trade through tokens. This is one of the momentum strategies.
This is benefiting to some point from the high volatility due to declining trading volumes. Momentum investing is when investors buy securities that are showing an upward price and sell them when they appear to reach the peak.
In this, the volatility is used to study the buying opportunities in short-term uptrends and then selling when momentum appears to be a downtrend trend.
Trading Volume of Cryptocurrency Remains Low
The Bank of America says that it expects the trading volume of cryptocurrency to remain low. As a result of which, the retailers will remain on the sidelines. Blockchain applications are continued to be in use by traditional finance companies. It is based on tokenizing demand deposits, repurchase agreements or repurchase options (REPO) and bond issuance.
Blockchain applications based on certain criteria are considered by trading finance companies. Issuing bonds is a way for companies to raise money. Tokenizing will increase security as the data is recorded or saved on distributed ledgers.
A repurchase agreement is an agreement made between the two parties in which the security is sold and later on bought at a higher price. So, blockchain applications used are focused on these criteria. They help to stabilize interest rates.
The conclusion drawn is that the upside nature of the crypto market is limited. Factors like scarcity, taxation or market cap will affect the market. The concern of this upside term of the crypto market will soon get changed.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2023/05/24/crypto-market-restricted-upside-value-bank-of-america/