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Bitcoin May Squeeze Higher As Retail Interest Subsides : Analyst

source-logo  coindesk.com 05 January 2022 12:51, UTC

Bitcoin, the crypto market leader, could be in for a recovery rally, as retail interest declines, analysts told CoinDesk.

“Whilst bitcoin remains flat in the short term, on-chain metrics like the paper hands ratio from Glassnode suggest a bottom could be nearing,” Marcus Sotiriou, analyst at the UK based digital asset broker GlobalBlock, told CoinDesk in an email.

The BTC paper hands ratio is the ratio of young coins active in the last six months to the cryptocurrency’s circulating supply. A high reading represents greed among retail or short-term traders, while a low number signals retail disinterest.

Retail investors are often referred to as having paper hands – weak capacity or desire to hold an asset for a long time – and are usually the last to enter the bull run and exit the bear run. Hence, declining retail activity is considered a contrary indicator – a hint of an impending reversal higher.

A cautious or bearish mood after notable sell-off and consolidation often leads to short squeeze and corrective rallies. Costs associated with holding shorts become an issue for the bears once the market stops falling, thus forcing them to unwind their bearish bets. However, a squeeze higher may remain elusive if the macro picture turns bleak, as discussed here.

Bitcoin was last seen trading near $46,750, representing a 2% gain on the day.

coindesk.com