The Reasons for Bitcoin's Price Stagnation

Bitcoin's sideways price movement is primarily influenced by cash and carry trading strategies and decreased trading volumes, reflecting a balance between buyers and sellers that affects BTC's price stability.

Source: www.barrons.com

Over the past four weeks, Bitcoin has been consolidating within a narrow range of approximately $7,500, encountering stubborn resistance around its 2017 all-time high of $69,000. Since May 17, BTC has been fluctuating between $72,000 as resistance and $60,000 as support. Despite several attempts, it has failed to surpass a new all-time high of $73,800. As of June 19, Bitcoin's price saw a modest 0.8% increase, reaching an intraday high of around $65,705, amid lower trading volumes, indicating a prolonged period of consolidation.

The Cash and Carry Arbitrage Trading Strategy Remains Ongoing

In recent weeks, Bitcoin's price has remained stagnant, primarily due to the prevalence of cash and carry arbitrage trading strategies. Cash and carry arbitrage involves taking a market-neutral stance by buying BTC in the spot market (going long) while simultaneously selling its futures contract (going short) when it trades at a premium.

According to reports from Investors, there were substantial inflows into crypto investment products in the week ending June 7. Despite these inflows, Bitcoin has continued its range-bound price movement, prompting questions about why the increased investments haven't triggered a rally. Glassnode data explained the rise in cash and carry trades such as long positions in the U.S. Spot ETFs paired with short positions in CME Group futures has diluted the impact of ETF buy side inflows. This trading strategy persists, as noted in the Week On Chain report on June 18. They use metrics like Spot Cumulative Volume Delta (CVD) to analyze the net bias in market-taker buy versus sell volumes, measured in U.S. dollars.

There Is Currently Reduced Speculation Appetite for BTC

Analysts have reported that despite Bitcoin's sideways movement, holders are currently seeing profits of around 120% at current prices. However, since reaching its all-time high, there has been a significant decline in the volume of transactions processed and transferred on the Bitcoin Network. A similar trend is observed in the spot trading volume across major centralized exchanges. 

Historical data from CoinMarketCap shows that Bitcoin's daily trading volume has dropped by 61.5%, falling from its peak of $102.3 billion when it reached previous all-time highs to the current level of $39.5 billion. This highlights a strong correlation between on-chain network settlement volumes and trade volumes, indicating a sense of investor disinterest.

The Bitcoin Price Is Currently Stagnant Oscillating Between 2 Significant Levels

Additional data from a market intelligence firm sheds light on the ongoing stalemate between buyers and sellers in Bitcoin. According to their in/out of the money around price (IOMAP) model, Bitcoin's price currently resides between two significant levels. On the downside, there is strong support within the $61,000 to $65,000 range, known as the demand zone. Approximately 807.83 million BTC were previously purchased by 2.61 million addresses in this area.

Conversely, on the upside, there is a congestion zone for sellers between $65,100 and $72,500, posing a formidable barrier for bullish movements. Approximately 2.94 million BTC were bought by approximately 5.2 million addresses at these higher price levels. While demand has been sufficient to absorb selling pressure, it has not been robust enough to stimulate significant upward momentum, thereby keeping Bitcoin's price range bound.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.