• A key metric measuring momentum in the Bitcoin price recently fell to its weakest level since March.
• This drop in momentum can be attributed to traders booking profits after the impressive rally this year, regulatory uncertainty, and high transaction fees.
• Despite this drop in momentum, it could still be a good time to buy Bitcoin as macro conditions are expected to turn favorable.
Bitcoin Price Momentum Falls
A key metric that measures momentum in the Bitcoin price just fell to its weakest level since March. Last week, Bitcoin’s Z-score to its 200-Day Moving Average (200DMA) fell under 1.0, where it has remained more or less ever since. This means that the current Bitcoin price is only just under one standard deviation above its average daily closing price over the past 200 days.
Causes of Momentum Loss
The loss of price momentum over the last few weeks can be attributed to a variety of factors. Traders booking profit in wake of this year’s impressive rally and tempering their optimism about how much further Bitcoin might rally have contributed significantly. Additionally, regulatory uncertainty regarding US crypto regulation and how much interest rates will be cut by the Fed later on this year has created a cloud of uncertainty for investors trying to decide when is best to buy and sell their assets. Lastly, high transaction fees amid a surge in block space demand due to popular BRC-20 tokens being issued directly on-chain have also been weighing on the price.
Effect on Daily Transactions
The effect of these conditions has been seen across multiple facets of blockchain activity: active daily users and new addresses interacting with the blockchain have both dropped off significantly compared with last month while daily transactions have surged to record highs as many opt for larger transactions rather than multiple smaller ones due to increasing fees per transaction size.
Is Now a Good Time To Buy?
Arguably, now may be an opportune moment for those looking at buying into Bitcoin despite the fall in momentum – a Z-score below 1 has often marked strong support levels during bull runs like those seen between 2015 and 2018 as well as late 2020 when prices went into overdrive thanks to massive fiscal and monetary stimulus programs worldwide.
Given that macro conditions are expected turn favorable soon, now may be an ideal time for those looking at investing in Bitcoin despite recent losses in price momentum; though always exercise caution when investing given volatility inherent within cryptocurrency markets!