Bitcoin price broke out this week, but has the trend changed?

1 year ago

Welcome readers, and acknowledgment for subscribing! The Altcoin Roundup newsletter is present authored by Cointelegraph’s nonmigratory newsletter writer Big Smokey. In the adjacent fewer weeks, this newsletter volition beryllium renamed Crypto Market Musings, a play newsletter that provides ahead-of-the-curve investigation and tracks emerging trends successful the crypto market.

The work day of the newsletter volition stay the same, and the contented volition inactive spot a dense accent connected the method and cardinal investigation of cryptocurrencies from a much macro position successful bid to place cardinal shifts successful capitalist sentiment and marketplace structure. We anticipation you bask it!

Time to spell long?

This week, Bitcoin’s (BTC) terms has perked up, with a surge to $21,000 connected Oct. 26. This led a fistful of traders to proclaim that the bottommost mightiness beryllium successful oregon that BTC is entering the adjacent signifier of immoderate method operation similar Wyckoff, a scope interruption oregon immoderate benignant of enactment absorption flip.

Prior to getting each bullish and opening 10x longs, let’s dial backmost to a erstwhile investigation to spot if thing successful Bitcoin’s marketplace operation has changed and whether the caller spat of bullish momentum is indicative of a wider inclination change.

When the last update was published connected Sept. 30, Bitcoin was astir $19,600, which is inactive wrong the bounds of the past 136 days of terms action. At the time, I had identified bullish divergences connected the play comparative spot scale (RSI) and moving mean confluence divergence (MACD). There were besides a fistful of imaginable “bottoming” signals coming from aggregate on-chain indicators, which were astatine multi-year lows.

Let’s instrumentality a look astatine however things are looking now.

The Bollinger Bands are tight

The Bollinger Bands connected the regular clip framework remains constricted, and this week’s surge to $21,000 was the enlargement oregon spike successful volatility that astir traders person been expecting. As is par for the course, aft breaking retired from the precocious arm, the terms has retraced to trial the mid-line/mid-band (20MA) arsenic support.

Despite the spot of the move, the terms remains capped beneath the 200-MA (black line), and it is unclear astatine this infinitesimal if the 20-MA volition present service arsenic enactment for Bitcoin’s price.

After bouncing disconnected a near-all-time debased astatine 25.7, the play RSI continues to inclination upward and the bullish divergence identified successful the erstwhile investigation remains successful play. A akin inclination is besides being held by BTC’s play MACD.

In the aforesaid chart, we tin spot that the astir caller play candle is en way to creating a play higher high. If the candle closes supra the scope precocious of the erstwhile 5 weeks and the terms sees continuation implicit the coming weeks with a regular oregon play adjacent supra $22,800, this could beryllium the makings of a inclination reversal.

On the regular timeframe, BTC’s Guppy aggregate moving averages (GMMA oregon Super Guppy) indicator is eyebrow-raising. There is compression of the short-term moving averages, and they are converging with the semipermanent moving averages, which typically indicates an impending directional determination or, successful immoderate instances, a macro inclination reversal successful the making.

For the past fewer weeks, Bitcoin’s “record-low volatility” has been the speech of the municipality and erstwhile utilizing the Bollinger Bands, the GMMA and BVOL, the tightening terms scope does hint astatine expansion, but to what absorption remains a mystery.

Bitcoin has been trading successful the $18,600–$24,500 scope for 36 days and from the position of method analysis, the terms remains adjacent the mediate of that range. The determination to $21,000 did not acceptable a important regular higher precocious nor flight from the existent range, which fundamentally is simply a sideways chop.

The terms is holding supra the 20-day moving mean for now, but we person yet to spot the 20-MA transverse supra the 50-MA, and the bulk of the Oct. 26 rally has retraced backmost to the debased $20,000 level.

A much convincing improvement would impact Bitcoin breaking retired of the existent scope artifact to trial the 200-MA astatine $24,800 and yet making immoderate effort to flip the moving mean to support.

A further hold to the $29,000–$35,000 scope would animate assurance from bulls looking for a clearer motion of a inclination reversal. Until that happens, the existent terms enactment is simply much consolidation that is pinned by absorption extending each the mode to $24,800.

Bitcoin on-chain information says to accumulate

Like BTC’s spot price, the MVRV Z-Score has besides bounced astir successful the -0.194 to -0.023 portion for the past 3 months. The on-chain metric reflects a ratio of BTC’s marketplace capitalization against its realized capitalization (the magnitude radical paid for BTC compared to its worth today).

In short, if Bitcoin’s marketplace worth is measurably higher than its realized value, the metric enters the reddish area, indicating a imaginable marketplace top. When the metric enters the greenish zone, it signals that Bitcoin’s existent worth is beneath its realized terms and that the marketplace could beryllium nearing a bottom.

According to the MVRV Z-Score chart, erstwhile compared against Bitcoin’s price, the existent -0.06 MVRV Z-Score is successful the aforesaid scope arsenic erstwhile multiyear lows and rhythm bottoms.

Reserve Risk

Bitcoin’s Reserve Risk metric displays however “confident” investors are contrasted against the marketplace terms of BTC.

When capitalist assurance is high, but BTC’s terms is low, the risk-to-reward oregon Bitcoin attractiveness versus the hazard of buying and holding BTC enters the greenish area.

During times erstwhile capitalist assurance is low, but the terms is high, Reserve Risk moves into the reddish area. Historical information suggests that gathering a Bitcoin presumption erstwhile Reserve Risk enters the greenish portion has been a bully clip to found a position.

Currently, we tin spot that implicit the past six months, the metric has been carving retired what investors mightiness picture arsenic a bottom. At the clip of writing, reserve hazard is rising toward 0.0009, and typically, crossing the 0.001 threshold into the greenish portion has marked the commencement of a recovery.

Looking forward

Multiple information points look to suggest that Bitcoin’s terms is undervalued and inactive successful the process of carving retired a bottom, but nary confirms that the existent marketplace bottommost is in.

This week, and successful erstwhile months, aggregate Bitcoin mining businesses person publically announced the request to restructure debt, the anticipation of missed indebtedness payments, and immoderate person adjacent hinted astatine imaginable bankruptcy.

Most publically listed miners person been selling the bulk of their mined BTC since June, and the caller headlines concerning Compute North and Core Scientific hint that Bitcoin’s terms is inactive astatine hazard owed to solvency issues among concern miners.

Data from Glassnode shows the aggregate size of miner balances hovering astir 78,400 BTC being “held by miners we person labelled (accounting for 96% of existent hashrate).”

According to Glassnode, successful the lawsuit of “income stress,” it is imaginable that miners volition beryllium forced to liquidate tranches of these reserves successful the unfastened market, and the knock-on effect connected Bitcoin’s terms could beryllium the adjacent catalyst of a sell-off to caller yearly lows.

This newsletter was written by Big Smokey, the writer of The Humble Pontificator Substack and nonmigratory newsletter writer astatine Cointelegraph. Each Friday, Big Smokey volition constitute marketplace insights, trending how-tos, analyses and early-bird probe connected imaginable emerging trends wrong the crypto market.

The views and opinions expressed present are solely those of the writer and bash not needfully bespeak the views of Cointelegraph.com. Every concern and trading determination involves risk, you should behaviour your ain probe erstwhile making a decision.

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