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Bitcoiners Crave ‘Storms Ahead’ as Retailers Stay Away

Crypto investors found something to cheer about during the recent downturn in digital tokens: the asset class held up better than just about everything else in the third quarter.

Crypto investors found something to cheer about during the recent downturn in digital tokens: the asset class held up better than just about everything else in the third quarter. Still, the hunt for a bottom continues as long-term holders cling to the expectation that more pain is to come – and retail investors remain on the sidelines.

Even with the story circulating that crypto stalled heavily in the July-September period, the mood has remained bleak. While about 83,500 new digital wallets come online every day, that’s a low for the 2020-2022 cycle, according to data collected by strategists at Glassnode.

Meanwhile, the wealth of “mature coins” is at an all-time high, the researcher said, as investors have long refused to issue them amid the market turmoil. The group of investors who are “pinching” through thick and thin — that is, those who remain loyal even in difficult times — have remained “steadfast,” Glassnode said, who said they may be hankering for “before the storms to come.”

Now that’s the problem for Bitcoin and other cryptocurrencies – the cohort of retail-type investors who fueled much of last year’s massive price hike were missing in action. Some market watchers say that with hodl investors waiting things out, the overhanging question remains whether — and when — individual investors will make returns.

“Overall price should outperform, and once it does, retail investor will get excited again. We definitely don’t have that at the moment because we’re just stuck in a streak,” said Matt Maley, chief market strategist at Miller Tobacco & Co. range.”

The problem is that Bitcoin has yet to bottom amid a sell-off that has dropped it by 60% this year. Many analysts say that if US stocks bottom, so can the digital token, although there’s little consensus on when that might happen. Others argue that once the dollar starts to weaken, Bitcoin could potentially break up as well.

Regardless, interest in crypto has declined in recent months. Google trends show that the general population is much less interested in the tokens. And Bitcoin’s on-chain activity has been low all year, according to a note from researcher Arcane researcher Jaran Mellerud.

“If it’s a risk asset, as many, myself included, have suggested, choosing a bottom in BTC is tantamount to choosing a bottom in stocks,” said Marc Chandler, chief market strategist at Bannockburn Global Forex, adding that “The crash has dampened the enthusiasm among people he speaks to.

With investors sitting out until Bitcoin and other cryptocurrencies can begin to recover, ETF flows have also remained muted. Money flowing out of crypto-related funds in the third quarter has slowed and some analysts argue that most of the fleeing investors happened in the second quarter. Now they just wait things out.

There are plenty who say that price recovery may still be a long way off. That is the view of Ashley Oerth, senior investment strategy analyst at Invesco, who says that cryptocurrencies are valued not by their own characteristics, but by the prevailing macro environment.

“’Next summer’ for crypto is likely when we see peak central bank power and a start of policy easing,” Oerth said. “To the extent that you believe in the long-term potential of crypto, this could be a buying opportunity now – if you can tolerate the volatility.”

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