Lack of positive catalysts, Bitcoin still has difficulty crossing the $28,000 mark

After the Biden administration reached a preliminary agreement with Republican lawmakers on the U.S. debt ceiling, Bitcoin briefly recovered $28,000 for the first time since the beginning of the month. However, Bitpush terminal data showed that as of press time, Bitcoin fell back below $28,000, and Ethereum traded around $1,910.75.

From a liquidity and macro perspective, Bitcoin is on track to post its first negative monthly return since November last year due to a lack of positive catalysts.

Whale supply indicators stagnate

According to data from on-chain analytics firm Santiment, the “supply distribution” metric shows that BTC whales have become more cautious in the past few weeks. Supply distribution measures the total amount of Bitcoin currently held by each wallet group in the market.

Santiment defines the holdings of whale wallets as 10-10,000 BTC. The following chart shows the supply distribution trend of this address group over the past few months:

As can be seen in the above chart, the total holdings of these addresses began to decline after surging in March. When these investors sold, the price mostly went sideways, which means that it was the selling of these groups that may have slowed the rise. Then, in mid-April, as BTC hit a local top near the $31,000 mark, the supply of whales instead hit a local bottom. As the price began to trend down, these investors then began to accumulate. This pattern means that these holders began to take advantage of the lows to buy again.

The data shows that these addresses have added a total of about 93,000 BTC ($2.6 billion at current prices) to their wallets since the accumulation began after the local high in April.

However, the supply to these addresses has begun to stagnate in recent weeks, and this new sideways trend may indicate that big investors are now cautious about buying more because they are unsure where BTC will go next.

Liquidity remains low

As debt ceiling negotiations put pressure on crypto investors last week and the latest Federal Reserve meeting minutes also showed that central bank officials were divided on the direction of interest rate hikes, Bitcoin's correlation with gold has fallen from its historical high this year and is beginning to behave more like a risky asset.

Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank, said bitcoin is currently testing its March resistance level of around $28,800.

The crypto market has been lacking liquidity stimulus recently. Matteo Greco, a research analyst at investment firm Fineqia International, said in his report: "In the medium term, funds will be withdrawn from riskier assets and used to purchase government bonds. The result may be a further slowdown in trading volume and liquidity in stock and digital asset markets, with potential negative impacts on prices."

James Check, chief on-chain analyst at Glassnode , said that after a long period of abnormally low volatility, Bitcoin’s next major price move could be imminent and could push BTC to $32,000. In an interview with Cointelegraph, Check explained that this price level is where Bitcoin’s “true cost basis lies.”

To calculate Bitcoin’s average cost basis (the average price at which BTC was purchased), Check and his team removed forever-lost or dormant coins from the calculations, focusing on active Bitcoin investors. “That’s where the mean reversion level is, so a rally to that level wouldn’t surprise me, to be honest,” he said.

Despite this bullish scenario, Check also noted that a large number of investors may be tired of the bear market and are waiting for Bitcoin to reach this level before selling, thus weighing on the price: “This is the area where you start to encounter more resistance.”

US Dollar Index Correlation

Bitcoin’s price action is closely tied to macroeconomic conditions. In recent weeks, Bitcoin has been suppressed below $30,000 due to unfavorable factors such as a stronger U.S. dollar index (DXY), a rebound in interest rates, and the possibility of further rate hikes from the Federal Reserve.

Glassnode co-founder Yann Allemann analyzed the possibility of a Bitcoin rebound in his tweet given the changes in DXY and interest rates.

Allemann believes that the U.S. dollar index – DXY – which measures the greenback against a basket of six major currencies has been a key factor influencing the price of Bitcoin. The strength of DXY is inversely proportional to Bitcoin, meaning that when the U.S. dollar index strengthens, Bitcoin generally weakens, and vice versa. The expected turning point of DXY at the 106-107 level could indicate a bullish trend for Bitcoin.

Additionally, a shift in macroeconomic conditions could bolster Bitcoin’s momentum. Congress will vote on the legislation as early as Wednesday, and it remains to be seen whether the debt ceiling deal can be passed on Wednesday.

According to Bitpush terminal data, as of now, the trading price of Bitcoin is $27,782. Without major positive news, Bitcoin and Ethereum may usher in their worst month since November last year.