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BTC’s value has increased by more than 30% since the beginning of August. If growth is estimated from July 21st onwards, it is 50% higher, but there is a catch. Bitcoin’s nett recovery has been less than 2% since August 20th.
There are now two methods to interpret such a sideways movement. Either the consolidation is leading to a tremendous spike, or Bitcoin may be in problems in the future.
Because there hasn’t been a defined market structure, it’s incredibly difficult to gauge short-term markets using on-chain activity right now. Taking a macro-level view, though, there may be more clarity in interpreting BTC’s long-term future.
How far is Bitcoin from being entirely bullish?
According to Fair Value Deviation research, Bitcoin is still in the “bull-bear” phase, which decides the long-term rally. At the moment, the FVD line is still below the blue bullish indicator, indicating that BTC has yet to confirm a proper bullish trend on the charts. However, flaws in the circulation ratio were also discovered.
According to data, the circulation ratio is currently indicative of a sell signal. As illustrated by the red line, the supply changing hands at the moment is not reciprocating the outright recovery. One of the inferences that can be drawn, is that the price is currently reacting to a relatively smaller supply in comparison to the early year rally.
This leads to a wider range of unpredictability since the price is reactive to the drastic movement of the active supply.
One particular neutral factor observed in the immediate on-chain data, was the slightly dropping funding rate. A couple of weeks back, funding rate was extremely high, but at the moment, it is more balanced in terms of derivatives traders.
So the Limbo continues?
Because BTC’s consolidation period has already exceeded 14 days, the long-term trend should be closing in a certain direction in the coming weeks. However, with the longer-term market trend indicating bearishness, Bitcoin may be better off registering a new local peak sooner rather than later. This is due to the possibility of a shift in the overall trend towards short-term bearishness.