Bitcoin is unlikely to enter a downward trend in the near term as fundamental factors continue to strongly support the current upward momentum, according to Matt Mena, a research strategist at cryptocurrency product provider 21Shares.
"The structural imbalance between soaring demand and depleting supply is making a prolonged correction increasingly unlikely," Mena shared with Cointelegraph. "At this moment, positive factors are outweighing negatives."
Bitcoin supply on exchanges and OTC hits record low
Mena stated that the amount of Bitcoin held on exchanges and OTC desks is currently at an all-time low, while demand for this asset continues to rise sharply.
"On the supply side, the fundamental factors are even more skewed," he said.
On Monday, Bitcoin reached a new peak at 122,884 USD, with new buyers entering the market seemingly unconcerned about the price and buying faster than miners can mine.
André Dragosch, Director of Research at Bitwise, noted that the low volume of searches for the keyword 'Bitcoin' on Google could indicate that retail investors are not yet fully participating.
"Bitcoin is at a new historical peak, but retail investors are almost nowhere to be seen," Dragosch commented.
The milestone of 122,884 USD was established just a few days after BTC surpassed the previous peak of 111,970 USD on July 9, marking the beginning of a rally that lasted until the weekend.
Mena said that in the first half of this year, Bitcoin ETF funds listed in the US absorbed an amount of BTC equivalent to several times the total amount of BTC that will be mined in the entire year.
"This figure doesn’t even account for businesses buying in to stockpile in their treasury," he added.
Macroeconomic risks could still impact price trends
However, Mena also warned that the possibility of a correction cannot be completely ruled out.
"Bitcoin could very well enter a phase of accumulation or even correction," he said, pointing out two macro risks that could affect the market:
If the tax levels proposed by Mr. Trump are worse than the current market expectations.
Or if Fed Chairman Jerome Powell signals that interest rate cuts will be delayed longer than expected.
Nevertheless, according to forecasts from 21Shares, a prolonged price drop over the next 6 months is unlikely.
"As summer ends and liquidity returns, we expect bullish momentum to continue," Mena emphasized.
"It is noteworthy that Bitcoin is reaching new highs right in the summer – which is typically the weakest time for liquidity and price movement during the year."
According to data from CoinGlass, the third quarter of each year has been Bitcoin's lowest-performing quarter since 2013, with an average increase of only about 6.32%.
"Summer is usually when the market is sluggish – traders go on vacation, trading volume decreases, prices go sideways," Mena said.
"But this cycle is going against that rule."
