Bitcoin’s price is approaching $40,000 as on-chain and technical analyses support bulls.

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Bitcoin’s price is still 38% behind its all-time high, but a number of technical indications show bulls are gaining ground.

Bitcoin (BTC) price witnessed a favourable turn of events on June 13 when it broke out to $39,252, but many analysts are still unsure whether the digital currency is ready to continue its climb.

To date, the crypto market remains volatile, and Bitcoin is still two months away from reaching an all-time high near $65,000. Delphi Digital spotted a “major head and shoulders pattern” in the market, which might “spell more short term pain if BTC falls below $30,000.”

With that in mind, now is a good opportunity to go through some crucial data points to get a better idea of where the Bitcoin price may go next.

Short-term holders suffer losses

A 50% drop in price in two months may appear excessive to those unfamiliar with the volatility of the cryptocurrency market, but it comes as no surprise to long-term hodlers who have witnessed several drawdowns of even greater scale over the last decade.

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Bitcoin price drawdown from 52-week high. Source: Delphi Digital

As seen in the chart above, a fall of 70% or more is not uncommon for BTC, especially after a large run-up in price, suggesting that additional pain is still a likely as bulls battle bears in the mid $30,000 level.

According to SOPR (Spent Output Profit Ratio) statistics highlighted by cryptocurrency analyst filbfilb, the fast decreasing prices drove new and existing Bitcoin investors to the sidelines, resulting in traders selling at a loss.

Bitcoin spent output profit ratio. Source: Decentrader

Signs of a SOPR reset have arisen in the last few days, indicating that ordinary wallets are again selling at a profit once more.

The Crypto Fear and Greed Index (CFGI) has likewise fallen to its lowest point since the March 2020 sell-off triggered by the Covid-19 epidemic.

BTC drawdown vs. crypto fear and greed index. Source: Delphi Digital

Many traders are sitting on the sidelines due to the high levels of anxiety that the majority of traders are presently experiencing, as more losses remain a genuine possibility.

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Low index scores, on the other hand, are a signal to contrarian investors to “be greedy when others are fearful,” as Warren Buffet would say, and the chart above demonstrates that purchasing at high fear times tends to be a favourable entry-level.

Sentiment begins to rebound

While Bitcoin’s price has lost more than $30,000 in the last two months, it’s crucial to remember that the amount it has fallen as well as its current price are roughly double the previous all-time high reached in 2017, highlighting just how substantial the rise has been over the last six months.

On-chain analysis from Decentrader shows that an ‘oversold’ signal was recently triggered, “suggesting that BTC may soon be ready to turn around and move to the upside.”

Bullish signal provided by the active addresses sentiment indicator. Source: Decentrader

The active addresses sentiment indicator compares the 28-day price change (shown by the orange line) to the 28-day change in on-chain active addresses (shown by the band of grey lines).

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The orange line rising from below the dotted green line back up into the active address change zone is seen as a bullish indication, and it most recently did so on June 10, signalling the prospect of a market reversal.

According to Rekt Capital, a famous Twitter analyst, Bitcoin is still on track to set a new all-time high.

 

For the time being, perhaps it’s best to take a vacation from poring at charts and fretting about the direction Bitcoin will follow. Long-term prospects remain positive, as nations such as El Salvador have begun to accept BTC as legal cash and more individuals become interested in cryptocurrencies.

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