Bitcoin Price Aanlysis: Key Technical indicators to watch

Key Technical indicators to watch

In our previous analysis, we observed that both the major support and resistance levels remain operative. Presently, Bitcoin is in a consolidation phase in the short term.

Taking a look at the 4-hour chart, we can note that Bitcoin has been on a downward trajectory since its peak at $31,000. The 55-period moving average constitutes a key resistance level, currently pegged at $27,042.

Source: Tradingview

Turning our focus to the daily chart, we find that the 89-period moving average stands as the principal support level, situated currently at $26,780. 

Impending Altcoin Season

The BTC dominance chart presents an intriguing scenario – it appears to be forming a diamond top pattern. This pattern typically indicates an imminent, significant downtrend. In layman’s terms, we can infer that altcoins, especially those paired with Bitcoin like ADA/BTC and LINK/BTC, may outperform Bitcoin in the near future.

Source: Tradingview

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On-chain data is signaling a “generational buying opportunity”

After the surge that we’ve seen this year, several on-chain measures from the Bitcoin (BTC) network are indicating that now is the time to purchase.

Bitcoin has emerged from its slumber to post a gain of 37% since the beginning of 2023, breaking out of its previous slump.

However, according to experts, on-chain data is still indicating it might be a “generational buying opportunity.”

On January 24, 2019, a researcher and technical analyst by the name of “Game of Trades” found six on-chain measures for the 71,000 people who follow him on Twitter.

The first measure is an accumulation trend score, and its purpose is to identify pockets of significant accumulation in terms of both the size of the organisation and the total amount of coins purchased.

The market analyst made the observation that “large entities have been in deep accumulation mode ever since the FTX collapse,” and went on to say that “similar accumulation took happened in the 2018 and 2020 bottoms.”

Six on-chain data pointing to a potentially generational and long-term purchasing opportunity for bitcoin

A thread called Game of Trades (@GameofTrades_), which may be found here. The 23rd of January, 2023 The ratio of the current market capitalization to the annualised dormancy value is the measurement that is used to determine the Bitcoin entity-adjusted dormancy flow.

When the dormant value surpasses the market capitalization, the market is said to have fully capitulated, which in the past has been a favourable purchasing zone.

Glassnode reports that in 2022, this measure reached an all-time low, making it the lowest point it has ever been.

The level of confidence that long-term Bitcoin holders have in relation to the price of Bitcoin may be measured using Bitcoin’s reserve risk.

According to the statistics provided by Glassnode, this dropped to its all-time lowest level by the end of 2022.

The Realized Price (RP) of Bitcoin is the worth of all coins in circulation at the price at which they were last traded. This is an estimate of what the whole market paid for their coins.

Since the fall of FTX in November till the 13th of January, Woo Charts indicate that Bitcoin has been trading at a price that is lower than this level.

At this moment, it is located slightly over the RP, which gives even another possibility for buyers.

The Bitcoin MVRV Z-score indicates if BTC is highly overvalued or undervalued in comparison to its “fair value” or the price it has actually been traded for.

It is common practise to consider the bear market to be over when the indicator no longer falls under the highly undervalued zone.

Last but not least, there is something called the Puell Multiple, which investigates the fundamentals of mining profitability and its influence on market cycles.

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Bitcoin’s Winning Streak Finally Comes to an End

Following the formation of the cryptocurrency’s first red candle on January 18, the two-week winning run that Bitcoin (BTC) had been on has finally come to an end.

The previous day, it seemed as if Bitcoin might equal or possibly break its record set in November 2013 of 15 straight days of positive price movement. This would have been the longest stretch of its kind in its entire existence.

In spite of the fact that the record wasn’t broken, Bitcoin managed to register the longest victory streak since the 2013 record in a run-up that some Twitter critics have described as “crazy.” Bitcoin is denoted by #. One bearish daily candle does not cancel out two weeks of all green candles being bullish.

the 18th of January, 2023 — IncomeSharks (@IncomeSharks) The primary reason for the negative price action appeared to be an ominous announcement made earlier on January 18 by the United States Department of Justice (DOJ), which stated that it would “announce an international cryptocurrency enforcement action.” [Citizens] should be aware that the DOJ has the authority to take legal action against anyone who engages in illegal activity related to cryptocurrencies.

However, it turned out that the action was taken against a rather obscure cryptocurrency exchange called Bitzlato that was situated in Hong Kong and had connections to Russia. Many people had assumed that it may be against a prominent cryptocurrency exchange or organisation.

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Bitcoin Settles Above $43,000, But What Does The 4-Year Cycle Say?

Bitcoin has already lost its footing above $44K after breaking the coveted point to much fanfare. The downtrend has not been significant in any way but the digital asset could still end up losing more ground before the end of the trading day. Nevertheless, it has been a good run for bitcoin coming out of the weekend. As the cryptocurrency has made its bottom above $43,000, what could be expected going forward?

Bitcoin In Four-Year Cycles

As bitcoin has settled above $43,000, looking at other metrics to figure out where the digital asset may be headed has become imperative. In this report, we take a look at bitcoin through 4-year cycles and what it has often meant for the asset. Four years is important to the movement of bitcoin given that things like halvings happen in such timeframes. But for this, we take a look at the monthly EMA50 and how it works as the last correctional support before takeoff.

Related Reading | TA: Bitcoin is Surging, Why Bulls Could Aim More Upsides

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The monthly exponential moving average is calculated using the past 50 periods. It is used to obtain the average price at which an asset has been acquired over a 50-day period. Thus, making it a widely used support level.

Over the years, at four-year intervals, the monthly EMA50 has served to show the final correction support for bitcoin. The first time was between 2009 to 2013, a four-year period that ended with the monthly EMA50 working as the final correction support. The same happens between 2013 and 2017, 2017 and 2021, with the next happening between 2021 and 2025.

For each of these, the monthly EMA50 has always stopped highly than the previous four-year cycle. Likewise, the price of bitcoin has not gone below this point.

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If this stays true, then bitcoin is likely forming its support higher than $30,000. Continuing on, this trend would put the price of the digital asset as high as $220,000 over the next four years.

bitcoin chart

EMA50 marks four-year cycles | Source: TradingView.com

BTC On The Charts

Long-term, bitcoin shows tremendous promise. With adoption expected to rise and supply on the decline, it would impose scarcity on the asset, making it even more valuable. However, in the short term, BTC continues to struggle price-wise.

Related Reading | The Bear Signal That Suggests Another Bitcoin Crash Is Coming

After fighting its way out of a bear trend, it remains up to the bulls to pull out from underneath the bears. Market sentiment is getting better but still remains mostly negative, making investors wary of putting more money into the market.

Bitcoin is now trading in the $43,500 territory at the time of this writing. It lost about $2K after bursting through $45,000 in the early hours of Tuesday. But it has begun to recover after falling near $43,000.

Bitcoin price chart from TradingView.com

BTC slips to $43K | Source: BTCUSD on TradingView.com
Featured image from Tokeneo, charts from TradingView.com

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Bitcoin crash ahead? Expert warns higher inflation could whip BTC price to $30K

Bitcoin (BTC) may end up falling to as low as $30,000 if the U.S. inflation data to be released on Wednesday comes any higher than forecasted, warns Alex Krüger, founder of Aike Capital, a New York-based asset management firm.

The market expects the widely-followed consumer price index (CPI) to rise 7.1% for the year through December and 0.4% month-over-month. This surge highlights why the U.S. Federal Reserve officials have been rooting for a faster normalization of their monetary policy than anticipated earlier.

U.S. headline inflation. Source: Bureau of Labor Statistics, Bloomberg

Further supporting their preparation is a normalizing labor market, including a rise in income and falling unemployment claims, according to data released on Jan. 7.

“Crypto assets are at the furthest end of the risk curve,” tweeted Krüger on Sunday, adding that since they had benefited from the Fed’s “extraordinarily lax monetary policy,” it should suffice to say that they would suffer as an “unexpectedly tighter” policy shifts money into safer asset classes.

Excerpts:

“Bitcoin is now a macro asset that trades as a proxy for liquidity conditions. As liquidity diminishes, macro players now in the fray sell bitcoin, and all of the crypto follows.”

The first interest rate hike in March 2022?

The Fed has been buying $80 billion worth of government bonds and $40 billion worth of mortgage-backed securities every month since March 2020. Meanwhile, the U.S. central bank has kept its benchmark interest rates near zero, thus making lending to individuals and businesses cheaper.

BTC/USD vs. Fed balance sheet. Source: TradingView

But the collateral damage of a loose monetary policy is higher inflation, which reached 6.8% in Nov. 2021, the highest in almost four decades.

So now the Fed, which once claimed that rising consumer prices are “transitory,” has switched its stance from expecting no rate hikes in 2022 to discussing three hikes alongside their balance sheet normalization.

“It’s more dramatic than what we anticipated and the Fed’s pivot to a more hawkish stance has been the surprise,” Leo Grohowski, the chief investment officer of BNY Mellon Wealth Management, told CNBC, adding:

“Most market participants expected higher rates, less accommodative monetary policy, but when you look at the fed funds implying a 90% chance of a hike in March, on New Year’s Eve that was just 63%.”

Mini bear market?

Mike McGlone, the senior commodity strategist at Bloomberg Intelligence, called $40,000 an important support level in the Bitcoin market. Furthermore, he anticipated that the cryptocurrency would eventually come out of its bearish phase as the world becomes digital and treats BTC as collateral.

BTC/USD daily price chart featuring $40K-level’s history as support. Source: TradingView

The statement arrived as Bitcoin’s drop from its Nov. 8 record high of $69,000 is now over 40%. According to Eric Ervin, chief executive officer at Blockforce Capital, the drop has primarily washed off recent investors, leaving the market with long-term holders.

It could be the beginning of a “mini bear market,” the executive told Bloomberg, adding that such corrections are “completely normal” for crypto investors.

Related: Bitcoin performs classic bounce at $40.7K as BTC price comes full circle from January 2021

Krüger also noted that Bitcoin has already dropped too much from its record highs, insofar that it now stands technically oversold. So, if the CPI reading surprises on the downside, markets could expect the BTC price to pop and trend for a while.

“Wednesday will have the US inflation data,” Krüger said, adding:

“Think prices should chop around 41k and 44k until then, with an upwards skew given how strong the rejection of the lows has been.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.