One of the most vital metrics used to evaluate the momentum of the Bitcoin price has reached its lowest level since March.The Z-score that Bitcoin maintains in relation to its 200-day moving average dropped below 1.0 one week ago, and it has remained there more or less ever since.
This indicates that the present price of Bitcoin is only slightly more than one standard deviation over its average daily closing price over the course of the last 200 days.
When we looked at Bitcoin’s Z-score to its 200-day moving average one month ago, it was 2.27. This was only a few days after Bitcoin had printed its highs for the year above $31,000.
A continued cloud of uncertainty regarding the US crypto regulation outlook and how much, if at all, the Fed will cut interest rates in the second half of the year has contributed to Bitcoin’s loss of price momentum over the past few weeks. This comes as traders book profits in the wake of this year’s impressive rally and temper their optimism about how much further Bitcoin might rally over the remainder of the year.
It might be argued that the high transaction fees associated with Bitcoin, which have been occurring alongside an increase in the need for block space due to the rising popularity of the new BRC-20 standard for crypto tokens that are produced directly on the blockchain, have also been a factor in the price decline.
In recent weeks, the number of active daily users as well as a number of new addresses that interact with the blockchain on a daily basis, have both plummeted off a cliff. On the other side, the number of daily transactions has surged to record highs. This has certainly acted as a deterrent for the blockchain’s more traditional usage as a ledger for digital currency.
If the cryptocurrency is considered to be in the ether early or middle stages of a bull run, a Z-score to the 200DMA of about or just under one has often been a good moment to purchase Bitcoin. This is despite the fact that it in no way assures that the price of Bitcoin doesn’t have further to fall in the short term.
The line that indicates a Bitcoin price that is one standard deviation above the 200-day moving average appears to have functioned as a significant level for a number of years.
This appeared to be the case in late-2020 as the Bitcoin bull market went into overdrive thanks to enormous fiscal and monetary stimulus, despite the fact that this wasn’t so much the case in 2019 and early 2020 as Bitcoin recovered from its bear market in 2018. However, it did appear to be the case in late-2020.
Given the current state of the BTC market and the fundamental environment, the Z-score to the 200-day moving average’s recent slide back to just below 1.0 might be interpreted as a good buy signal for the medium to long-term.
This is because it is expected that macroeconomic conditions will get better over the rest of the year. For example, US interest rates seem to have reached their highest point, regional banks are still in trouble (which drives demand for “hard money” like Bitcoin and gold as a safe haven), and inflation is coming back under control (which gives the Fed more room to start cutting rates in the future).
A lot of technical and on-chain signs, as well as an analysis of Bitcoin’s longer-term trend, show that the cryptocurrency has moved into the early stages of a new bull market. Since then, this information has come from a number of different places.
Bitcoin appears to be in a short-term downward trend channel and is still below both it’s 21-Day and 50-Day Moving Averages, which raises the possibility that near-term bearish predictions of a retest of important long-term support in the $25,000 range may very well come true.
On the other hand, many Bitcoin bulls and investors with a longer-term perspective are likely to be patiently waiting on the sidelines for an opportunity to purchase Bitcoin at $25,000.
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