Bitcoin’s most recent upswing, which saw the world’s largest cryptocurrency by market capitalization hit a new nine-month high on Tuesday in the mid-$26,000s, has been accompanied by a number of key technical and on-chain indicators roaring back to health and once again sending a bullish BTC signal. Bitcoin’s most recent upswing saw the world’s largest cryptocurrency by market capitalization hit a new nine-month high in the mid-$26,000s.
Although the price of Bitcoin has fallen below the $25,000 level once again as of the Asia Pacific session on Wednesday, BTC is still up over 27% in comparison to its lows from last week, which were in the mid-$19,000s. At that time, there were worries about a string of high-profile failures of crypto-, start-up-, and tech-friendly institutions, which was a factor that was dragging on the price.
However, buyers fought hard to protect key long-term levels, such as the 200-day moving average (DMA) and the realized price (both in the area of $19,700–800). Then, the announcement that US regulators would be intervening 1) to safeguard depositors and 2) to implement a fresh $25 billion bank liquidity program to improve balance sheets helped send Bitcoin higher. Both of these measures were announced over the weekend.
Other key narratives that are fueling the rally include 1) the idea that concerns about financial stability make significant further Fed tightening much less likely, and 2) the idea that concerns about financial stability boost the appeal of Bitcoin, which represents an alternative, decentralized financial system. Both of these narratives have the effect of making significant further Fed tightening much less likely.
The rally’s momentum has been assisted along by Bitcoin’s successful defence of its 200-day moving average (DMA) and its realized price. Following a week in which it displayed some symptoms of weakness, the most recent rebound has caused a number of important on-chain metrics to begin heading in the desired direction.
More specifically, if Bitcoin is able to keep its recent gains and/or extend upside towards the next key resistance around just above $28,000 (as many technicians now believe is likely), the “Recovering from a Bitcoin Bear” dashboard of on-chain and technical indicators that is widely followed by the cryptocurrency analytics firm Glassnode is likely to once again start flashing a bull market signal.
Recovering from a Bitcoin Bear
The “Recovering from a Bitcoin Bear” dashboard from Glassnode monitors eight different indicators in order to determine whether or not Bitcoin is trading above key pricing models, whether or not network utilization momentum is increasing, whether or not market profitability is returning, and whether or not the balance of USD-denominated Bitcoin wealth favours the long-term HODLers.
When all eight of these indicators start flashing green at the same time, this has traditionally been interpreted as a very strong bullish sign for the Bitcoin market. At this time, seven out of the eight indicators are displaying a green blinking light. Bitcoin’s current price is trading at a level that is clearly higher than both its 200-day moving average and its realized price. Many people believe that if prices are able to break above these critical levels, it will be an indication that the price momentum in the near term is turning in a favorable direction.
A few months ago, the 30-Day Simple Moving Average of new Bitcoin address generation climbed above its 365-Day Simple Moving Average, which is a hint that the rate at which new Bitcoin wallets are being formed is picking up speed. This has typically taken place at the beginning of bull markets throughout history.
The Revenue From Fees Multiple indications was one that started moving in the positive direction on Wednesday, but it started moving back in the negative direction on Thursday. The amount of standard deviations that are either above or below the mean of a data sample is what the Z-score refers to. In this particular scenario, the Z-score for Glassnode is the number of standard deviations that are higher or lower than the mean Bitcoin Fee Revenue over the course of the previous two years.
This suggests that the third and fourth indicators about whether network utilization is moving favorably once again are also providing a bullish signal. This is because both of these indicators relate to whether or not network utilization is increasing.
Moving on to the fifth and sixth indicators relating to market profitability, despite pulling back sharply in recent days to reflect the recent drop in the Bitcoin market, the latest reversal to new nine-month highs has kept the 30-Day Simple Moving Average (SMA) of the Bitcoin Realized Profit-Loss Ratio (RPLR) indicator above one. This is despite the fact that recent days have seen a sharp pullback in response to the recent drop in the Bitcoin market.
This indicates that the Bitcoin market realizes a higher proportion of gains (measured in USD) than losses at the present time. “this often means that sellers with unrealized losses have been exhausted,” writes Glassnode. “there exists a healthier influx of demand to absorb profit taking.” As a result, a positive signal is generated by this indicator once again.
Analysis of Bitcoin Market Cycles Also Give Reason to be Bullish
The aforementioned positive shift in Bitcoin’s on-chain trends comes at a time when more commonly cited so-called “core” on-chain metrics, such as the number of active addresses, the number of addresses with a non-zero balance, the rate at which new addresses are created, and the number of daily transactions, have all been trending in a positive direction, indicating rising demand to utilize the Bitcoin blockchain.
Several approaches to analyzing Bitcoin’s market cycle over the long term also provide grounds for cautious optimism. A crypto-focused Twitter account called @CryptoHornHairs discovered at the beginning of January that Bitcoin is following almost exactly in the path of a roughly four-year market cycle. This cycle has been respected perfectly now for over eight years, so it is safe to say that Bitcoin is following it almost exactly.
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