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Bitcoin Cycle “Nowhere Near The Top”

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Bitcoin price still can’t crack back above $60,000 and prices are slowly moving downward. And while the creator of the popular stock-to-flow model agrees there’s no avoiding regular corrections in the leading cryptocurrency, the top of the current cycle is “nowhere near.”

Here’s a closer look at why the model’s creator is so confident in further price appreciation, along with a technical look at where the cryptocurrency could be in the current cycle, in comparison to previous cycles.

Stock-To-Flow Creator Says The Top In The Current Cycle Is “Nowhere Near”

Bitcoin is well on the way to proving the highly cited stock-to-flow model for predicting future price appreciation to be true. The now revised mathematical model takes into consideration the asset’s limited supply, regularly scheduled halvings, and other factors to formulate a potential trajectory the price per BTC should loosely follow.

RELATED READING | BITCOIN MINERS DUMPING HALF A MILLION BTC COULDN’T DENT BULL RALLY

Due to the cryptocurrency’s notorious volatility, price can fluctuate significantly yet still for the most part follow the stock-to-flow model’s trajectory. Plan B, the model’s creator took the opportunity to remind followers of the prediction tool that the cryptocurrency can rise or fall by 20% or more in short timeframes.

bitcoin stock to flow creator btc

Stock-to-flow creator says that the top is "nowhere near." | Source: Plan B on Twitter

But regardless of any of the intraday noise, he concludes, this bull run is “nowhere near the top.” Plan B claims that this is both due to what the modified S2FX model predicts, along with outrageously bullish on-chain metrics.

The S2F creator is joined by other top crypto analysts who point to fundamentals that suggest further price appreciation is only a matter of time. There’s less BTC on exchanges, miners are no longer selling, and much more in the coin’s favor.

Beware: Bitcoin Is Overdue For Deeper High Timeframe Correction

At this point, few who understand what Bitcoin has to offer the world expect anything less than hundreds of thousands of dollars per coin. The stock-to-flow model is almost a self-fulfilling prophecy in that respect, where if enough believers expect this to happen and hold as a result, the chances increase that it actually is the ultimate outcome.

But along the way, like the S2FX model creator says, Bitcoin is volatile and that’s likely to remain a key factor in its long-term growth. Even if the top is miles or months away, that doesn’t mean the trending cryptocurrency can’t retest levels lower.

bitcoin high timeframe bull market shakeout

The fifth month after breaking the former ATH acts as the bull market bounce bottom | Source: BTCUSD on TradingView.com

According to a technical look at past cycles, Bitcoin is due for a higher timeframe shakeout of epic proportions. Each bottom tends to occur on the fifth monthly candle after surpassing the former all-time high.

In 2013, Bitcoin fell 74% from the breakout high, to rebound low. It then went on to rise from $64 per coin to $1,200 in the next four months. In 2017, Bitcoin fell 36% to $3,000 then in three months rocketed to $20,000. The same zone ended up acting as the most recent bear market bottom.

RELATED READING | DATA: BITCOIN BULL RUN MAY BE LESS THAN ONE-QUARTER COMPLETE

The current consolidation could be building a similar type of base. The base building might conclude, however, with a fake out to the downside has it has done in the past, before heading into the final phase of the bull run. The final phase is where the majority of the gains are made, bringing another 1500 and 500% ROI from the two preceding cycles.

If this projection is correct, a crash could be coming that causes investors to question that the top is in. But like the S2F creator says, its nowhere near, and the move is rather normal volatility on the way to much higher prices ahead.

Featured image from Deposit Photos, Charts from TradingView.com





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This metric that called the 2017 top is now flashing red

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After weeks of Bitcoin (BTC) sell-offs, high-net worth individuals, or whales, are finally back to buying.

Their buying activity did not only pick up when the BTC price broke out of the two-months ascending triangle to new all-time highs, but also stayed intact since the price crash on April 18.

Whales have come back to accumulate Bitcoin

Their continuous buying activity comes at a time when addresses holding more than 1,000 Bitcoin reached their 4-month support line.

Bitcoin: Number of Addresses with Balance >= 1k. Source: Glassnode

This is probably not a coincidence as the turnaround takes place at a time when profit-taking in the market is close to its support line too.

Current profit-taking behavior has followed a 7-month trend

The level at which profit-taking takes place can be derived from the adjusted Spent Output Profit Ratio (aSOPR), which measures the ratio between the price sold and the price paid for a coin while disregarding temporary coin movements (movements within less than 1 hour).

In other words, aSOPR measures by how much holders were sitting in profit (in USD) by the time they sold their coins.

Since September 2020, profit-taking has kept finding positive support at higher levels. This suggests that whenever sell-offs happened in the past seven months, sellers were comfortable not selling at a higher profit level each time, compared to the previous sell-offs. However, this trend might eventually come to an end.

Bitcoin: Adjusted SOPR (aSOPR) 10-day moving average. Source: Glassnode

Profit-taking activity suggests the market is at a pivotal moment

When zooming out and looking at profit-taking behavior in all prior bull markets, it becomes apparent that this is not only a one-time or a short-term trend but rather a longer-term pattern in Bitcoin bull markets.

These support lines tend to hold for 3-18 months. The chart below shows that a break of the second support line in each bull market historically confirmed that the bull market top was in.

Bitcoin: Adjusted SOPR (aSOPR) 10-day moving average. Source: Glassnode

Not only is the aSOPR close to breaking the 7-month support, but there is also one major difference in the latest pattern of this metric that could be a cause of concern.

Usually, the short-term tops of the aSOPR come in at higher levels each time as price increases further and rising confidence leads people to hold on to higher profits after each sell-off.

However, in the latest pattern, profits have been realized earlier in every sell-off wave for the last three months (see red arrow), a pattern usually common after a bull market top was already in.

Short-term sellers are in the driver’s seat

The latest pattern could be explained by a slower price increase in recent months and a higher number of short-term holders realizing profits. This assumption is confirmed by looking at HODL Waves, which visualize the time Bitcoins are held on to.

The redder the color, the shorter the holding period. It becomes visible that it is short-term holders who have held Bitcoin for between one week and three months have been primarily selling into the market as of late.

Bitcoin: HODL Waves. Source: Glassnode

When looking at the profit-taking behavior of short-term holders (STH-SOPR) only, one could infer that this cohort of traders might almost be done selling. The latest dip below the value of 1 shows that short-term holders even started realizing losses.

In a bull market run-up, this is usually where a bottom in price could be expected as selling activity tends to decrease significantly.

Bitcoin: Short Term Holder SOPR (24h Moving Average). Source: twitter.com/glassnode

However, as bull market tops are not formed by a lack of sellers but rather by a lack of buyers, it is highly important to also look at the trend of the current demand side.

Current on-chain volume activity suggests that the capital inflow trend is still intact. A high number of coins are still changing hands, suggesting that buying activity is still ongoing. The realized price, which expresses this buying activity by valuing all Bitcoins based on when they last moved on a daily basis, gives a good idea of how much capital moved in and out of Bitcoin.

Bitcoin: Realized Price. Source: Glassnode

A steep curve suggests high on-chain transaction volumes. If it is followed by a flat trend, it usually indicates the beginning of the bear market as not enough buyers are coming into the market willing to pay higher prices anymore. As long as this steep curve does not flatten, there should be no concern about a dwindling number of buyers.

Although this evidence suggests that the bull market top is likely not in yet, there is also no clear confirmation that sellers are done selling just yet.

A break of the aSOPR 10-day moving average support line could be confirmed in the next few days. This may signal a trend shift in sellers’ behavior from bullish to bearish. Therefore, a negative short- to mid-term scenario should be considered if this occurs.

Support levels in a bearish case

There are two major price support levels to look out for. The first one is around $51,325, which could be a strong defense zonea support level where whales most recently acquired a high volume of Bitcoin.

The second price support level is the NVT (Network Value to Transactions Ratio) price, which is currently at $47,679 and is a major price support level in Bitcoin bull markets.

If the market price was to fall significantly below the NVT price without a quick recovery within a few days, a detailed analysis of the demand side would be needed to judge if the market’s bullish structure has broken.

Market at a critical level, strong support between $47K–$51K

The supply-side suggests that sellers are currently in the driver’s seat, even selling Bitcoin at a loss in the past few days. However, their selling activity is expected to significantly reduce over the next few days if current behavior stays in line with prior bull market sell-offs.

If that is not the case, the breakdown of the aSOPR 7-month support line is likely and could signal a trend shift from bullish to bearish selling. Further downside should be expected with next major support in the range of $47,000-$51,000.

On the demand side, the capital flow still looks healthy. Enough volume is still willing to pay current prices, while whales ramped up their buying again. Current price action is still above NVT price, which suggests that current price fluctuations are still within the expected bullish territory.

Nevertheless, the demand side should be watched closely for a potential dry-up in on-chain volume over the next few days if price comes close to the NTV price.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Nothing here should be considered investment or trading advice. Past performance is not a guarantee of future results. Every investment and trading move involves risk. The author owns Bitcoin. You should conduct your own research when making a decision and/or consult with a financial advisor.