Onchain

Three key Bitcoin price indicators explain why BTC price continues to fall toward new lows.

Bitcoin (BTC) surpassed the $30,000 resistance on June 21, or 40 days ago, after a notable 19.5% gain in a week. Since then, it has been moving within a range filled with occasional moderate corrections and BTC price trades near $29,300. While these consolidation periods are common in traditional markets, they tend to make crypto investors quite anxious.

As Bitcoin's price repeatedly fails to break the $31,000 level, traders are becoming increasingly tense and their sentiment is worsening. This trend could reverse suddenly, regardless of any relevant news or macroeconomic factors that might support an upward move andcrypto traders' emotions can magnify positive and negative price swings, leading to euphoric and fear-led price action.

Bitcon’s low volatility sessions have traders worried

The increased anxiety among traders is partly due to Bitcoin's historical volatility, which used to be much higher than its current levels. Presently, the 33% annualized 50-day volatility is the lowest in 6 months, contrasting sharply with the 60% or higher volatility observed for 245 days throughout 2022. Despite the rationale for this shift, the recent period has been relatively calm for Bitcoin's price.

To put it in perspective, consider that auto and electric battery producer Tesla (TSLA), a top-10 global asset and part of the S&P 500 index, currently experiences a 58% annualized volatility. In comparison, graphics chipmaker NVidia (NVDA) has consistently demonstrated a 70% or higher volatility for most of 2021.

While some analysts use volatility data to predict trends, it's essential to note that this indicator relies on absolute price changes, yielding the same outcome for both upward and downward price swings. Therefore, volatility only provides information about the magnitude of daily oscillations.

However, apart from price changes, there are other metrics that can indicate investors' excitement or lack of interest in an asset, such as evaluating its market share or market dominance.

Bitcoin dominance shows declining interest relative to altcoins

On July 30, Bitcoin's market share in the total crypto capitalization dropped to 49.5%, the lowest figure since June 16.

This decline can be partially attributed to a favorable legal decision for Ripple Labs on July 13, which reduced regulatory risks for altcoins. Industry representatives believe this decision will benefit crypto exchanges Coinbase and Binance in their SEC lawsuits. The diminishing dominance of Bitcoin marks a trend shift from the gains observed between December 2022 and June 2023 when it increased from 40.2% to 52%.

Lackluster network activity is another sign of negative investor sentiment

Bitcoin's 1-year active supply, representing the sum of unique BTC transacted in the trailing 12 months, reached its lowest level since February 2016 at 6.0 million BTC as of July 26. This data, compared to the 6.2 million BTC activity three months prior, raises concerns, especially with the potential approval of spot ETFs in the U.S.

The decreasing number of Bitcoin moved on-chain might have been offset by the increased use of the Lightning Network as an alternative solution. However, this Layer 2 solution currently holds a mere $138 million in Total Value Locked (TVL) and shows a near unmoving 16,382 nodes in the past 30 days.

Related: US banking advocacy group supports Sen. Warren’s reintroduced crypto bill

Bitcoin options traders are losing confidence

The main "fear and greed" metric for Bitcoin options, the 25% delta skew, indicates that bulls are becoming less confident over time. Readings above 7% suggest traders anticipate a drop in Bitcoin's price, while periods of excitement typically yield a -7% skew.

Currently, the 30-day metric remains flat at 1%, indicating a balanced demand between call (buy) options and protective puts, signaling a neutral market. However, it does show a decreased appetite among bulls compared to the 2% to 14% discount on neutral-to-bearish put (sell) options between June 19 and July 29. This derivatives data strongly supports the notion that traders have become less confident since the $29,500 support level broke.

As investors' mood worsens and indicators point to increased tension, Bitcoin price faces mounting pressure in the near term. Falling dominance, lackluster network activity and concerns in the options markets all contribute to the potential negative impact on Bitcoin price. On a positive note, if traders remain cautious and anticipate further downward movement, the likelihood of excessive liquidations among leverage traders is reduced.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.