Crypto Market Outlook Bitcoin: Grinding The Price

By: Joshua Aldio, Business Associate

Disclaimer: Tokenomy does not provide any investment, financial, accounting, valuation, tax, legal or other professional advice. The opinions expressed in the article is the author’s personal view only. All decisions to buy, sell or trade any Digital Asset using the Services are made solely by you, and you are fully responsible for all such decisions.

Bitcoin (BTC) charged above $22,000 on July 27 after the United States Federal Reserve enacted another significant interest rate hike. TradingView showed BTC/USD reacting positively to confirmation that the Federal Open Markets Committee (FOMC) had unanimously voted to hike the Fed funds rate by 75 basis points. “The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run,” a press release stated. At the time of writing, volatility characterized spot markets as BTC/USD flitted around $22,000. Fed chair Jerome Powell was due to begin a press conference at the time of writing, his language apt to add other head or tailwinds to the market trajectory.

Bitcoin futures data shows an ‘improving’ mood’

CME futures data combined with numbers from derivatives platforms suggest that investors are getting less fearful. While attention has focused on the likelihood of a deeper macro low for BTC/USD to come, it appears that not every investor cohort is ready to run for the exit.

Even at current prices 70% below all-time highs, the mood among institutions is strengthening. For Arcane, the proof is in the rising premium paid by CME Bitcoin futures clients.

While still low by historical standards, this premium slows upward through the second half of July. “Basis premiums are now sitting at similar levels on CME and the offshore exchanges, indicating that the market sentiment is balanced among different groups of traders,the research suggests.

While the basis premium on CME has grown, it’s still just 2.2%, a relatively low level historically. This indicates that although sentiment is improving, traders still exercise caution.”

The Crypto Fear & Greed Index continues to provide commentary on improving investor confidence, recently ending its longest-ever stint in its lowest “extreme fear” zone.

Bitcoin Technical Analysis

We foresee Bitcoin creating a higher low in the 4H time frame and getting away from the sideways area. As shown in the chart above, Bitcoin bounced at Fibonacci level 61.8 at $21,000 and moved up to $23,100, gaining 13% from its low. The next target price is around $26,400 as we use the external Fibonacci retracement 1.618.

In the higher time frame, we can see that Bitcoin has a BOS (break of structure) movement and reacts to the OB (order block) to continue its bullish trend.

Bitcoin on-Chain Analysis:
HODLer Supply Concentrations

With the market valuation of Bitcoin falling over 75% in 2022, speculators have been primarily expelled from the network (as discussed in WoC 27). During this process, a redistribution of coins from lower convictions to strong conviction holders. This is a mechanism native to any market cycle where assets are transferred to more cost-insensitive HODLers who invest more extended time frames and allow their coins to mature in cold storage. We can observe this phenomenon via the Unspent Realized Price Distribution (URPD), separated by the Short Term and Long Term Holder cohorts. Note that the Short-to-Long-Term Holder threshold (155-days) is back in mid-Feb when prices were trading around $40k.

  • The $20K region has attracted a sizeable Short-Term Holder coin volume cluster. This results from a significant transfer of ownership from capitulating sellers to new and more optimistic buyers.
  • Short Term Holder demand nodes can also be seen at the psychological price levels of $40K, $30K, and $20K. Notably, much of this supply (incl. the LTH supply above) has not capitulated, despite prices trading more than 50% below their acquisition level. This is likely indicative of ownership by relatively price-insensitive buyers.

It would be constructive to see these STH held coins at the $40k-$50K level start to mature to LTH status over the coming weeks, helping to bolster this argument.

Looking at the URPD by cohort age, we can observe the distribution of the Bitcoin Supply by time since the coins were last transacted. There are two fundamental points to take away:

  • Elevated demand can similarly be noted around the $20K region, with a vast amount of recent transactions occurring in this zone. This area also contains the 2nd and 4th largest URPD nodes (around 900K BTC), further indicating a significant transfer of ownership within this zone.
  • Maturity can decline from the ATH to the current market value, reflecting the duration of the prevailing downtrend. Large volumes of coins accumulated over 6-months ago, holding heavy unrealized losses, appear unwilling to sell.

Both URPD formats present a case that Holders hold an increasingly large proportion of the supply, allowing coins to mature despite holding losses. Their demand inflows have centered around the psychological $20k, $30k, and $40k consolidation zones.

However, it is essential to note that many long-term holders have contributed to the sell-side during this process, and the URPD charts represent the ‘post-dust settling’ condition to date. Furthermore, these high supply concentration nodes may act as firm resistance when the market attempts to recover higher.Rebounding Off An Over-extension

Prices have responded positively this week, breaking above the recent consolidation zone. This comes from what may be considered a significant short-term over-correction, with many metrics reaching extreme statistical deviations.

This was driven heavily by a period of rapid deleveraging across the market. Many lenders, investors, and trading firms saw collateral liquidated, either by discretion or as forced sellers, as seen in WoC25: Falling Dominoes: Capitulation Across the Board and WoC23: Miner Incomes Under Stress.

The Mayer Multiple can assess deviations between spot prices and the 200DMA. The 200DMA is widely used within the traditional technical analysis to distinguish between macro bull and bear trends.

At the most extreme during this price correction, the Mayer Multiple had reached below 0.55, signaling the market was trading at a 45% discount to the 200DMA. Such events are highly uncommon and only account for 127 out of 4186 days, a total of 3% of the trading history.

The MVRV Metric is another powerful tool to assess these deviations between spot pricing and the aggregate market cost basis. With BTC prices breaking above the Realized Price this week, pushing the broader market back into aggregate profit, the short-term outlook has shifted upwards, with participants eager for any relief rally.

Bitcoin as an asset is constantly maturing. In recent years it has garnered interest on both institutional and national levels. Therefore, to account for dynamic economic climates, a 4 Year Rolling Z-Score is used to normalize the data while also capturing the typical halving cycle.

  • Standard Deviations below -1 have a strong history of helping to identify bottom formation. Thus far, it has signaled undervaluation for all bear cycle bottoms, including 2015, 2018, and the March 2020 flash crash.
  • The June leg down in price action has produced the lowest 4-yr rolling Z-Score value on record, suggesting a statistically extreme deviation, adding fuel to the present upwards relief rally.

To Holding BTC Right Now

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