Barely a day after bitcoin reclaimed $60k but still failed to maintain it, to trade lower around $59,847 at press time, analysts are now expressing different views about the top digital asset’s next move.
At this point, bitcoin’s charts reveal both bullish and bearish signals, based on its past history, according to crypto technician ‘Byzantine General’.
BTCUSD Chart By TradingView
Bearish Scenarios for BTC
When the majority of its market cap is held by short-term rather than long-term hodlers, bitcoin reaches a cycle top.
“We’re currently making such a shift, but it’s not yet at previous levels of extremity.”
A high and consistent funding rate for the past several months shows that there is overcrowding on the long side of the market. The Kimchi premium has risen meaning that Koreans are buying bitcoin at a high premium.
“During the cycle top in ’17, there was a big Kimchi premium.”
Consequently, due to the high funding rate, memory pools get crowded, which leads to higher processing fees and this makes traders withdraw when transactions become too expensive to process over the network.
“High tx fees are bad for business.”
As the biggest Bitcoin trust fund in the world, Grayscale’s GBTC is also gaining influence on Bitcoin’s price direction since there’s a lot of demand that comes through it, especially from institutional investors.
“Holdings have plateaued the past couple of months, and even declined a bit in March. The trust is currently closed.”
This makes it harder to access the market for buyers who rely on the fund. Additionally, the fund’s premium went negative earlier this year and has remained so to this moment. However, if Grayscale gets approval for a Bitcoin ETF, the premium problem would be solved. These factors together with the fact that the recently approved Canadian BTC ETF has been experiencing a rapid uptick in BTC demand indicate that the market could currently be overbought.
“Some on-chain metrics suggest that we’re nearing overbought/euphoria levels. One of my favs is reverse risk which basically shows long term holders confidence.”
BTC Fundamentals Are Looking Good Long-Term
On the bullish side, bitcoin fundamentals look fine as long as bitcoin exhibits less volatility and becomes more stable, making it reliable, in addition to being secure and totally decentralized.
Secondly, Bitcoin’s spot volume has exploded, despite coming down in the past few weeks-a norms during consolidation. The market cap of the world’s most popular stablecoin Tether has also been soaring. The BTC/USDT pair is the most popular BTC and stablecoin pair and since tether’s market cap is rising, this intimates that demand is still present.
“And with Tether settling the legal demand, there’s no uncertainty anymore either.”
As earlier reported, the “miner net position change” metric, which suggests that miners are accumulating rather than selling their mined BTC on exchanges, is flashing green. As a result, spot exchange reserves keep dropping, showing that demand is very real and consistent.
“Miners don’t seem to be selling anything at all. Pretty much no miner to spot exchange flow. In fact miner outflow in general is very low.”
In the derivatives markets, the Spent Output Profit Ratio (SOPR) which calculates the price sold/price paid ratio hit a near reset recently, implying that there’s a balance between profit and loss for traders in the market.
“Such resets are often great buying opportunities in a bull market.”
Retail Mania Is Coming
Byzantine says while Bitcoin has had great success from institutional buyers, the best of the retail sector is yet to be seen. Low BTC Google and Coinbase search volume could be a positive indicator that more people are now familiar with BTC and are not googling the word itself anymore.
“This is stronger evidence though that retail mania isn’t here yet. Web traffic to exchanges has been increasing a lot but also not at ATH levels yet.”
In conclusion, the whole space is changing, led by Bitcoin, the entire DeFi sector, and the budding NFT sphere, making Bitcoin’s price pullback only temporary. However, there is still a chance that this bull cycle is different and bitcoin could create a new cycle structure.
