Expert analysis: Key metric indicates Bitcoin price will drop further
On July 3, Bitcoin experienced one of its worst-ever network hash rate dips.
- Bitcoin (BTC) is currently showcasing monthly losses of around 6%+.
- Data suggests that BTC’s volatility days may not be over just yet and that the currency may only find its local bottom sometime during October.
- Experts believe that the unlocking of Grayscale BTC (GBTC) shares later this month could have an adverse impact on Bitcoin’s spot prices.
After scaling up to a price point of $35,800 this week, Bitcoin, the world’s largest cryptocurrency by total market capitalization, has continued to exhibit an increasing amount of volatility, sliding back down to $33,000 before recovering and settling around the $34,000 range. At press time, BTC is trading for $34,208.
In terms of the flagship crypto’s future, BTC recently faced one of its largest-ever mining difficulty drops ever — of approximately 28% — a little over 72 hours ago. This drop has led many to believe that the currency might have finally found its local bottom, especially considering that BTC’s value has found strong support around the $34,500 range for over a week.
Bitcoin’s hash rate over the last 180 days (source: Blockchain.com)
That said, according to author and investment manager Timothy Peterson, the ongoing correlation between Bitcoin’s price and its hash rate seems to quite clearly suggest that more bearish action may be in store for the digital asset, at least for the next quarter or so.
Peterson highlighted that the relationship between BTC’s value and hash rate can be extremely useful when “marking macro price tops.” In this regard, he even released a chart showcasing similar cycles witnessed back in 2013 and 2017. “Based on the current trend, this bubble would finish collapsing by October 31,” he added.
Could BTC drop below $29K?
For over a month, Bitcoin’s value has continued to stay rangebound between $29K-$40K. But some analysts believe that a potential sell-off — related to shares tied with the Grayscale Bitcoin Trust (GBTC) that are set to become available to many investors after a nonnegotiable six-month lock-up period — could result in BTCs spot prices dropping quite drastically.
GBTC premium has been in the ‘red,’ or exhibiting losses, for many months, and therefore there are widespread fears that mass liquidations may on the cards, especially as Bitcoin crosses its native asset value (NAV). That being said, GBTC is currently trading at a discount, or under its NAV, and has been ever since the latter half of February 2021.
On the matter, investment strategist Lyn Alden opined that as more GBTC shares continue to get unlocked this month, a potential spot price crash could definitely play out. “When ETFs and other new ways to access Bitcoin made GBTC less unique, the premium went away, so the neutral arb trade went away,” he closed out by saying.
That said, it is anyone’s best bet at this point how BTC’s future will play out, especially as adoption continues to gain more and more momentum globally.
Disclosure: The author owns a range of cryptocurrencies at the time of writing