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Is it time to take the long way?
The Bitcoin price has risen this week with an increase to $21,000 on October 26. A few traders proclaimed that Bitcoin’s bottom was in or that BTC might be entering the next phase (or both) of a technical structure such as Wyckoff or some type of support resistance flip.
Before we get all bullish about opening 10x longs, let us go back to an earlier analysis to determine if there has been any change in Bitcoin’s market structure and whether this recent surge of bullish momentum indicates a larger trend change.
The last update published September 30th. Bitcoin was at $19,600. This is still within the limits of the last 136 days’ price action. Bullish divergences were identified on the weekly relative strength indicator (RSI), and the moving average confluence divergence(MACD) at the time. A few potential bottoming signals were also coming from several on-chain indicators that were at multi-year highs.
Let’s look at where things stand now.
Bollinger Bands are very tight
Bollinger Bands remain tight on the daily timeframe, and this week’s surge to $21,000 was an expansion or spike of volatility that most traders had been anticipating. The price has reversed after breaking out of the upper arm to test the support at the mid-line/mid band (20MA).
Despite the strong move, the price is still below the 200-MA (blackline) and it’s not clear at the moment if the support of the 20-MA will be Bitcoin’s price.
The weekly RSI continued to trend upward after rebounding from a 25.7-year-old low. However, the bullish divergence noted in the previous analysis is still in place. BTC’s weekly MACD also shows a similar trend.
The same chart shows that the weekly high for the latest weekly candle is on its way to becoming a weekly record. This could signal a trend reversal if the candle closes higher than the range highs for the past five weeks. If the price continues to rise in the next weeks, with a daily or weekly close of above $22,800 each week, it could happen.
BTC’s Guppy Multiple Moving Averages (GMMA, Super Guppy) indicator on the daily timeframe is a dazzling sight. The short-term moving trends are compressing and converging with long-term ones. This can indicate a directional move in the near future or a macro trend reversal.
Bitcoin’s record low volatility has been the talk in the town for the past few weeks. When using Bollinger Bands and the GMMA, the tightening price range does suggest expansion. But, it remains a mystery to what extent.
For 36 days, Bitcoin traded in the $18,600 to $24,500 range. Technical analysis shows that the price is still within the middle of this range. The $21,000 move did not create a significant daily high or escape from the current range. It is simply a sideways chop.
Although the price is above the 20-day moving mean for now, we have yet see the 50-MA cross the 50-MA. The majority of the Oct. 26 rally has been retraced to the low $20,000 levels.
Bitcoin could make a more convincing move by breaking out of its current range block and testing the 200-MA at $24,800, then eventually trying to turn the moving average to support.
Bulls who are looking for a sign of a trend change would be encouraged if the range extends to $29,000-35,000. The current price action, which is just more consolidation, is being held by resistance that extends all the way up to $24,800.
Related: Why is crypto trading so hot today?
According to Bitcoin on-chain data, it is possible to accumulate
The MVRV Z-Score, which is BTC’s spot rate, has fluctuated in the -0.194 – -0.023 range for the past three month. On-chain metrics are a ratio between BTC’s market capitalization and its realized capitalization. This is the amount that people paid for BTC today.
The metric enters red if Bitcoin’s current market value exceeds its realized value. This indicates a potential market top. The metric entering the green zone indicates that Bitcoin’s current price is lower than its realized value and that the market may be approaching a bottom.
The MVRVZ-Score chart shows that Bitcoin’s current price is -0.06. This is the same range as previous multiyear lows or cycle bottoms.
Bitcoin’s Reserve Risk Metric shows how confident investors are compared to the market price for BTC.
Investor confidence is high but BTC’s prices are low. This is when the risk-to–reward ratio or Bitcoin attraction versus the risk to buy and hold BTC is in the green zone.
Reserve Risk tends to move into the red zone when investor confidence is low but the price rises. According to historical data, it is a good time for Bitcoin investors to start a Bitcoin position as Reserve Risk moves into the green zone.
We can see that the metric has been carving what investors may call a bottom over the past six-months. Reserve risk is currently rising towards 0.0009 at the time of writing. Typically, the crossing of the 0.001 threshold into green zone has signaled the beginning of a recovery.
Numerous data points seem to indicate that Bitcoin’s value is low and that it is still trying to find a bottom. However, none of these data points confirm that Bitcoin is at its bottom.
Multiple Bitcoin mining companies have made public statements this week and in the past months about the need to restructure their debt. There is also the possibility of missing debt payments. Some even suggested bankruptcy.
The majority of publicly traded miners have been selling most of their mined BTC from June. Recent headlines regarding Compute North, Core Scientific and Core Scientific suggest that Bitcoin’s value is still at risk because of solvency issues among industrial miners.
Glassnode data shows that the aggregate size of miner accounts hovers around 78.400 BTC. This is 96% of current havehrate.
Glassnode says that in the event of income stress, it is possible for miners to be forced to sell tranches of their reserves on the open market. The knock-on effect on Bitcoin’s value could be the next catalyst for a sell-off at new yearly lows.
Big Smokey is the author of Substack, and resident newsletter writer at Cointelegraph. Big Smokey will be writing market insights, trends, how-tos and analyses every Friday. He also conducts early-bird research to identify emerging trends in the crypto market.
These views and opinions are the author’s and do not necessarily reflect those of Cointelegraph.com. You should do your research before making any investment or trading decision.