At the beginning of 2023, Bitcoin has grown steadily. Tired of an exhausting bear market, users may be wondering if what’s happening means a fundamental change in trend.
With technical analysis tools, on-chain metrics, and expert opinion, ForkLog makes sense of the status quo.
- Bitcoin at the beginning of the year showed a recovery. Cryptocurrency quotes have crossed the 200 SMA – a sort of dividing line between a bear market and a bull market.
- A number of on-chain indicators agree that a trend breakout is imminent.
- Bitcoin’s correlation with the Nasdaq index dropped to December 2021 values. This is a positive for the cryptocurrency market.
What do the indicators say?
Technical Analysis Tools
Since the beginning of the year, the price of the first crypto has increased by about 40% – from about $16,500 to about $24,100 (as of January 24, 2023). However, Crypto gold is still far from its all-time high (new high) near $69,000 hit on November 10, 2021.
The bitcoin price is about 66% off its new high. Messari data as of January 24, 2023.
However, the positive developments in the market environment and the performance of several indicators are encouraging.
“While there is still the risk of rollbacks and retesting [минимумов]we are likely entering the early stages of a new bull market,” said Philip Swift, founder of Look Into Bitcoin.
As you can see in the weekly chart below, at the beginning of the year, the key support level B was held up, and after rebounding from it, the price cut through the A zone like butter, which became the support level before the FTX crash. The market is volatile for a long period of time.
Key levels on the BTC/USD weekly chart. Data: TradingView, Research Bitcoin.
Swift does not rule out the possibility of resuming the downtrend. However, according to him, the path of least resistance is upwards. The next important target is around the $25,000 mark.
For the first time since the end of December 2021, the price of bitcoin was above the 200-day simple moving average — a kind of dividing line between bear and bull markets.
Data: Glassnode.
Importantly, the price recovery in January was supported by a notable increase in trading volumes.
Data: Arcane Research.
On-chain indicators
At the beginning of November 2022, the first crypto market broke through the bottom of the previous market cycle. In the eyes of many, after the lower extreme has been overcome, consolidation and a new bullish trend with recovery are just around the corner. However, another “black swan” soon appeared – Sam Bankman-Freed’s huge business empire collapsed. During the FTX crash, the Crypto gold reached $15,476 (in the BTC/USDT pair on the Binance exchange).
Upward value destruction days (CVDD) and equilibrium price indicators for the second half of the year indicate a high probability of quotes hitting a cyclical bottom. After a while, the consolidation really kicks in and the market starts to recover.
Data: Research Bitcoin.
Philip Swift emphasizes that with each day after the price bounces off the indicator’s key value, the probability of a sustained increase in the rally increases.
2022 will be a truly challenging year for miners – the difficulty caused by rising hash rates and falling prices has forced many players to sell Crypto assets and/or exit the market.
Against the backdrop of what’s going on, Pewell’s multiplier fell into bullish territory. Currently, the indicator exits from the “green zone,” which historically signifies a transition from a bearish to a bullish phase.
Data: Research Bitcoin.
Hash Ribbons Crossing and exiting the red zone of the Hash Ribbons indicator shows that the worst is over for miners and the potential for a Crypto gold rally continues.
Data: Research Bitcoin.
According to Swift, the aforementioned indicators signal a return to investor confidence. An improvement in market sentiment could reduce potential selling pressure, which is also a positive for prices.
Bitcoin quotes rose above realized values for the first time in a long time. It is also a positive sign for market participants, suggesting that the bearish phase may be over.
Data: Research Bitcoin.
Amid the market panic caused by the FTX crash and its aftermath, Bitcoin’s real market capitalization fell by 18.8% relative to new highs at the end of December. This is the second highest number in history.
Data: Glassnode, Bitcoin Magazine.
Analysts at Bitcoin Magazine are sure that this pullback represents a rare opportunity for buyers. They believe that acquiring the first cryptocurrency during such a period promises to be lucrative in the long run.
The orange line of the MVRV Z-Score indicator is moving out of the “green zone” – another signal about the bottom channel.
Data: Research Bitcoin.
The thesis about market phase changes is also confirmed by a long-term indicator – the RHODL ratio. Its orange line is preparing to leave the oversold zone. The latter represents the most favorable period for implementing buy and hold and/or DCA strategies.
Data: Research Bitcoin.
The continued drop in price did not have much impact on on-chain activity. For example, in 2022, more than 556 million BTC worth nearly $15 trillion will pass through the first crypto network. Compared with the previous year, this number has increased by 102%.
Data: Bitcoin Magazine.market sentiment
The aSOPR indicator has finally breached the 1.0 mark, which had not been breached since late April last year. This is a sign of improving market sentiment and that there is enough demand to absorb the selling due to profit-taking.
Data: Glassnode.
The emergence of investor confidence is also evidenced by the cryptocurrency Fear and Greed Index. It has finally turned towards neutral, although it has barely left the “fear” zone since April 2022.
Data: alternative.me. addresses and holdings of hodlers
An important fundamental factor is the increase in the number of Bitcoin addresses with non-zero balances. He pointed to the growth in the number of market participants and the accumulation of coins in the wallets of those who believe in Bitcoin’s long-term potential.
For example, in 2022, the number of addresses with a balance ≥ 1 BTC has grown by 20%. This number is growing exponentially, approaching the 1 million mark.
Data: Glassnode, ForkLog Analysis Report 2022.
Year-over-year positive dynamics are also observed for smaller addresses with at least 0.01 BTC and 0.1 BTC.
Data: Glassnode, Bitcoin Magazine.
The number of bitcoins in holder wallets (considering coins older than 155 days) is approaching 14 million bitcoins. This is 72.5% of the total market supply of the first cryptocurrency.
Data: Glassnode, Bitcoin Magazine.
“There are people all over the world who are buying this asset. There’s a whole bunch of people who are adding [биткоин]regardless of price,” said Bitcoin Magazine’s Dylan Leclerc.
The realized Bitcoin price-weighted HODL wave indicates a full “restart” of the market after peaking in late 2021 (red and yellow bars). A similar “cooling off” has occurred at past bearish phase bottoms.
Data: Research Bitcoin.macro factors
The limited supply and many other factors suggest that mass adoption around the world could push the price of Bitcoin to sky-high prices.
The market cap of the first crypto is less than $500 billion. The corresponding figures are closer to $12 trillion for gold, ~$127 trillion for fixed income instruments, and over $250 trillion for the residential real estate market.
Data: Bitcoin Magazine.
If at least 1% of the world’s wealth was concentrated in Bitcoin, the crypto would be worth more than $300,000 and have a market capitalization of $5.9 trillion.
It is well known that geopolitical conditions and macro factors have a significant impact on capital markets and economic growth. Movements in Bitcoin’s price don’t happen out of thin air, either. The first cryptocurrency rallied on the back of widespread liquidity injections due to the coronavirus crisis. However, once the US authorities tightened monetary policy, the growth quickly turned into a decline.
Fed rates will peak at 4.75%-5% in March, according to 61 of 90 economists polled by Reuters. Regulators are then likely to keep the indicator at a constant level, at least until the end of the year.
For a long time, the price movement of the first crypto has been almost in sync with the U.S. stock market. The latter, in turn, are sensitive to changes in Fed interest rates.
However, in early 2023, Bitcoin’s correlation with the Nasdaq index dropped to 0.29. This is the lowest value since December 2021.
The dynamics of Bitcoin’s correlation with the Nasdaq index. Data: Arcane Research.
The already-forgotten narrative of Bitcoin as a protective asset may soon emerge in the cryptocurrency community due to the “decoupling” of the stock market.
What do the experts say?
Bloomberg strategist Mike McGlone is convinced that the first cryptocurrency is bottoming out in the same way it did before the start of the bullish phase in 2019. The essential difference is the tightening of global monetary policy.
Four years ago, monetary regulators generally lowered interest rates. For now, they are still increasing, experts say.
“Back then, the Fed had already started easing and we held the bottom and broke up. […] Now they are actively tightening [политику]. give him [биткоину] a little time. Overall, yes, it’s a bullish picture,” McGlone explained.
Vetle Lunde, senior analyst at Arcane Research, is also bullish on the future prospects of Crypto gold.
“Lower correlations are a positive for the market,” he stressed.
Given the value of on-chain indicators, Swift predicts the development of an uptrend.
“Now is probably the best time to accumulate Bitcoin before a new bullish rally begins,” the expert shared his thoughts.
Find
In this review, this scenario is considered specifically for Crypto gold. However, it is clear to many that Bitcoin’s growth will be a powerful driver of recovery in other markets, as most coins are closely related to the first cryptocurrency.
The unstoppable growth in computing power amid falling prices reaffirms miners’ continued investment in equipment and their confidence in the future prospects of the market.
The steadfastness of coin holders accumulating assets regardless of price dynamics is impressive. The growth in the number of various coins relative to “small” addresses is also encouraging.
A number of on-chain indicators are already in full swing, signaling the end of a bearish phase in the market. That means consolidation and a bullish rally are just around the corner, and it’s time to buckle up.
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Information source: compiled from FORKLOG by 0x Information.Copyright belongs to the author Алекс Кондратюк, without permission, may not be reproduced