Where the year 2021 started fantastic for the bitcoin price, the market has been struggling for two months now and uncertainty still seems to predominate among traders. Historic low spot volumes and a strong dollar are the main factors driving the prevailing uncertainty in the market, according to the Delphi Digital research team.
During the bull run that started at the end of 2020 and lasted until May 2021, many new investors have joined. People who for the first time buy bitcoin and have yet to discover what exactly it is can sometimes be shocked by the fierce price action and that is exactly what has happened.
Bitcoin has taken a strong hit and that means that many newcomers are currently on the cut or even panicked to sell their bitcoin. Time to analyze how we are doing.
Historically low spot volumes on the major exchanges
According to the analysts of Delphi Digital the decline in trading volume in the spot market is a catalyst for the loss of momentum from the bull run. After the blow we made on May 19, there has been a real exodus at the major exchanges in terms of trading volume. People who come quickly and come in with a lot of emotion are often the people who leave at the slightest setback.
The spot market is the regular trading exchange, where you buy or sell your coins without fuss.
With the fall of the bitcoin price volumes on the major exchanges have fallen by 60 percent and leveraged trading is also a lot less popular. Many traders become overconfident during a bull run and start playing with leverage that is actually too large for their portfolio.
Those people have now been “punished” and much of the volume in the leveraged market has disappeared. Which means that the hype is pretty much out of the market and it is mainly the long-term hodlers who are currently buying bitcoin and have faith in the future. Slowly a bottom seems to be forming from which we can continue the upward path of the past twelve years.
Strong dollar leads to bitcoin weakness
Another important factor that, according to Delphi Digital, is responsible for depressing the bitcoin price is the strong dollar. On May 25, the world reserve currency reached the temporary bottom and jumped upwards, probably partly at the expense of the bitcoin price.
If the US dollar manages to make another leap upward, it could have consequences for bitcoin and the financial markets in general. Of course, with regard to those consequences, we are mainly talking about the bitcoin price in the short term. It is important to realize that bitcoin itself has not changed.
The bitcoin price is extremely volatile, but bitcoin itself is not. The network still produces a block every ten minutes and the maximum of 21 million units is still standing proudly. This is what makes bitcoin so special. It is an asset that exists completely separate from all emotions of people and the financial system. A bit of security in an otherwise volatile world.
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