Bitcoin gains capped as support turns into resistance

Takeaways from the conference:

• The fact that Bitcoins are being traded by large numbers of holders, who previously did not have any Bitcoins, raises questions about their long-term reliability.

• However, traders have shifted to privacy coins like ZEC and DCR, which are on the rise.

BitcoinBTC) has repeatedly struggled to maintain prices above $106,000 since early November, despite the S&P 500 sitting 1% below a new all-time high. Gold, the classic store of value has recovered from its recent declines and is now trading at just 4% of its previous record price of $4,380.

Many traders claim that Bitcoin is affected by factors specific to the crypto industry. But are they serious enough to prevent BTC from ever reaching $112,000? 

Recent strength in the US Dollar Index DXY against a basket major currencies is a sign of renewed confidence that the US Treasury can manage fiscal challenges. When investors fear stagnating growth amid persistent inflation — a scenario often described as stagflation — the domestic currency typically weakens, as monetary expansion becomes unavoidable.

For this reason, many traders will highlight the importance of the long-standing inverse correlation The DXY is the price of Bitcoin. In contrast, the US Stock Market tends to gain from a strong dollar and low interest rates. The lower borrowing costs boost corporate valuations while the favorable exchange rate makes imported goods cheaper when priced in local currency.

Companies that pursue Bitcoin reserve strategies such as Metaplanet and Strategy (MSTR), were amongst the biggest corporate buyers in the past, particularly when their stocks traded at a higher price than their assets. This relationship is captured by the mNAV, which represents the Bitcoin value relative to a company’s enterprise values.

The Bitcoin price decline has erased the incentive to issue shares by companies

Recent declines in the crypto market have largely eliminated this benefit, and companies are less likely to be motivated to create additional shares. The current market price would make any new share issuance unattractive, as it would dilute the existing shareholder base. meaningful mNAV premium.

Debt holders often demand collateral, which reduces the amount of Bitcoin factored into a company’s enterprise value. In order to secure debt, creditors often ask for collateral. As a result, the company’s enterprise values are reduced by less Bitcoin.

Investor fear grew when long-term Bitcoin owners, those dating back to 2018 or before, began selling after a drop of 20% from $126,220, the previous high. The most prominent of these cases is believed to involve Owen GundenThe arbitrage trader, who was active during the time of the Mt. Gox exchange who, according to reports, holds Bitcoin worth more than $1 billion.

Owen has transferred over 1,800 BTC worth more than $200 million to the Kraken Exchange in the last week. Although it is not uncommon for addresses that have been dormant to transfer funds, some traders wonder if these transactions are indicative of a waning confidence in the long term, especially amid concerns over quantum resistance. privacy-focused cryptocurrencies.

ZcashZECThe price of ) has risen by 98% in the last 30 days. This was followed closely by an increase of 74% for Decred.DCRDash rose by 37%DASHMonero increased 22% (XMR). Although there were $524 inflows of net funds into Bitcoin ETFs on Tuesday, the buyer sentiment remains muted. This makes the likelihood that BTC will reach $112,000 near-term relatively low.

Bitcoin’s price recovery is being held back by the selling of long-term Bitcoin investors, strong US dollars and growing interest for privacy tokens. This has kept Bitcoin’s prices below $106,000, and indicates that any meaningful gains may be limited.

The article does not provide legal advice or investment recommendations and it is intended for informational purposes only. This article is solely for informational purposes. It does not represent or reflect Cointelegraph’s views.