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Friday, June 2, 2023

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Bitcoin Hangs At $26,200: Why This Is A Crucial Support Level

Bitcoin has plunged during the last 24 hours and now finds itself at the $26,200 level. Here’s why this level is important for the asset. Bitcoin 200 WMA & 111 DMA Are Both At $26,200 Right Now In a new tweet, the analytics firm Glassnode has talked about how the different technical pricing models for Bitcoin may be interacting with the asset’s price currently. There are four relevant technical pricing models here, and each of them is based on different moving averages (MAs) for the cryptocurrency. An MA is a tool that finds the average of any given quantity over a specified region, and as its name implies, it moves with time and changes its value according to changes in said quantity. MAs, when taken over long ranges, can smooth out the curve of the quantity and remove short-term fluctuations from the data. This has made them useful analytical tools since they can make studying long-term trends easier. In the context of the current topic, the relevant MAs for Bitcoin are 111-day MA, 200-week MA, 365-day MA, and 200-day MA. The first of these, the 111-day MA, is called the Pi Cycle indicator, and it generally finds useful in identifying short to mid-term momentum in the asset’s value. Related Reading: Bitcoin Sell-Side Risk Ratio Nears All-Time Lows, Big Move Soon? The 200-week MA is used for finding the baseline momentum of a BTC cycle as 200 weeks are equal to almost 4 years, which is about what the length of BTC cycles in the popular sense is. Here is a chart that shows the trend in these different Bitcoin technical pricing models over the past year: Looks like pairs of models have come together in phase in recent weeks | Source: Glassnode on Twitter As shown in the above graph, these different Bitcoin pricing models have taken turns in providing support and resistance to the price during different periods of the cycle. For example, the 111-day MA turned into support recently, as the price rebounded off this level back during the plunge in March of this year, as can be seen in the chart. The 111-day and 200-week MAs have recently come into phase, as both their values stand at $26,200 right now. This is the level that Bitcoin has been finding support at in recent days, so it would appear that the base formed by these lines may be helping the price currently. Related Reading: Sharks & Whales Accumulate Stablecoins, Why This Could Be Bullish For Bitcoin Glassnode notes that if a break below this region of support takes place, the next levels of interest can be the 365-day and 200-day MAs. The former of these simply represent the yearly average price, while the latter metric is called the Mayer Multiple (MM). The MM has historically been associated with the transition point between bullish and bearish trends for the cryptocurrency. When the 111-day MA provided support to the price back in March, the metric had been in phase with the MM. From the graph, it’s visible that the 365-day and 200-day MAs have also interestingly found confluence recently, as their current values are $22,300 and $22,600, respectively. This would imply that between $22,300 and $22,600 may be the next major support area for the asset. BTC Price At the time of writing, Bitcoin is trading around $26,200, down 4% in the last week. BTC has plunged during the past day | Source: BTCUSD on TradingView Featured image from iStock.com, charts from TradingView.com, Glassnode.com

Litecoin’s MVRV Has Surged, Why This Is Bearish

On-chain data shows the Litecoin MVRV has been at relatively high levels recently, something that could be bearish for the cryptocurrency. Both 30-Day & 365-Day Litecoin MVRV Ratios Are High Currently According to data from the on-chain analytics firm Santiment, LTC traders are well above water at the moment. The “MVRV ratio” is an indicator that measures the ratio between the two main capitalization models for Litecoin: the market cap and the realized cap. The market cap here is the usual cap that calculates the total value of the asset by simply taking the value of each coin in the circulating supply the same as the current spot price. The realized cap, however, is a more special model as it assumes that the actual value of any coin in circulation is the price at which it was last transacted on the blockchain. Since this model aims to estimate a sort of “true value” for Litecoin, its comparison with the market cap (that is, the spot price) in the MVRV can tell us whether the asset’s price is fair or not right now. When the MVRV has a value greater than 1, it means the market cap is above the realized cap currently. During such times, the average investor is in a state of profit, so the incentive to sell for them increases. As such, the cryptocurrency could be considered overpriced in these conditions. Related Reading: How Does Current Bitcoin Rally Compare With Historical Ones? On the other hand,  the indicator having a value lower than this threshold implies the average holder is in a loss, and hence, the asset may be undervalued currently. Now, here is a chart that shows the trend in the 30-day and 365-day moving averages (MAs) of the Litecoin MVRV ratio over the last few months: Looks like the values of the metrics have been high in recent days | Source: Santiment As displayed in the above graph, both the 30-day and 365-day MAs of Litecoin MVRV have risen above the baseline with the recent surge in the price beyond the $90 level. This may mean that the cryptocurrency could have become slightly overpriced. Prior to this surge, when LTC had been visiting some lows, the 30-day version of the indicator had temporarily entered into the undervalued region. Coinciding with these values of the metric, the price formed its bottom and eventually built up towards the current surge. Related Reading: Former MicroStrategy CEO Says Bitcoin Rally Just Getting Started Back in April, the MVRV MAs showed a similar behavior as right now, as they touched relatively high values when the asset had rallied above the $100 mark. The rally stopped before long in those overvalued conditions, and the asset took a plunge. If a similar pattern as back then also follows with the current overpriced values of the indicator, then Litecoin may go on to observe a correction in the near future. In the long term, however, the outlook of the asset could still remain bullish, as the much-awaited halving event, where the cryptocurrency’s block rewards will be permanently cut in half, will take place in August, which is just around the corner now. LTC Price At the time of writing, Litecoin is trading around $91, up 1% in the last week. LTC has seen some surge in the last few days | Source: LTCUSD on TradingView Featured image from iStock.com, charts from TradingView.com, Santiment.net

How Does Current Bitcoin Rally Compare With Historical Ones?

Here’s how the current Bitcoin rally stacks up against the previous ones in terms of the drawdowns it has experienced so far. The Current Bitcoin Rally Has Seen A Peak Drawdown Of -18.6% So Far In a recent tweet, the on-chain analytics firm Glassnode compared the latest Bitcoin rally with the ones seen throughout the entire history of the cryptocurrency. Generally, rallies are compared using metrics like the percentage price uplifts recorded during them or the amount of time that they lasted (which may be measured in terms of the blocks produced, as is done when looking at cycles in terms of halvings). Here, however, Glassnode has taken a different approach that provides a new perspective on these rallies. The comparison basis between the price surges here is the drawdowns that each of them experienced across their spans. Note that these drawdowns aren’t to be confused with the cyclical drawdowns that are used to measure how the price has declined since the bull run top. The drawdowns in question are the obstacles that the cryptocurrency encountered while the rallies were still ongoing, and are hence, those that the coin eventually managed to overcome. Related Reading: Prices Limit And Slow Down The Number Of BTC ‘Wholecoiners?’ Here is a chart that shows the degree of drawdowns that each of the historical bull markets experienced, and also where the current rally stands in comparison to them: Looks like the value of the metric hasn't been too high for the latest rally so far | Source: Glassnode on Twitter The five bull rallies here are as follows: genesis to 2011 (the very first rally), 2011-2013, 2015-2017, 2018-2021 (the last rally), and 2022 cycle+ (the ongoing one). The analytics firm here has taken the bottom of each of the bear markets as the start of the next bull rallies. This means that parts of the cycle that some may not consider as part of the proper bull run are also included. The main example of this would be the April 2019 rally, which is often considered its own thing but is clubbed with the last Bitcoin bull market in the above chart. From the graph, it’s visible that the deepest drawdown that occurred during the first bull market measured around -49.4%. The next run, the 2011 to 2013 bull, experienced an even larger obstacle of a -71.2% plunge midway through it. The next one (2015-2017) then only saw a drawdown of -36%, but the drawdown was again up at -62.6% for the run that followed it (that is, the latest bull market). Related Reading: Bitcoin Volatility Shrinks To Historical Levels, Violent Move Incoming? So far in the 2022+ Bitcoin bull market (which would only be considered a bull market at all if the November 2022 low was truly the cyclical bottom), the deepest drawdown observed so far is the March 2023 plunge of -18.6%. Clearly, the drawdown seen in the current rally so far is significantly lesser than what the historical bull markets face. If the pattern of the past runs holds any weight at all, then this would mean that the current bull market should still have more potential to grow. BTC Price At the time of writing, Bitcoin is trading around $26,900, down 2% in the last week. BTC has been moving sideways recently | Source: BTCUSD on TradingView Featured image from iStock.com, charts from TradingView.com, Glassnode.com

Bitcoin Plunges Below $27,000 As Miners Show Signs Of Selling

Bitcoin has now dipped below the $27,000 level as on-chain data shows the miners have possibly been selling the asset recently. Bitcoin Miner Reserve Has Taken A Sharp Plummet Recently As pointed out by an analyst in a CryptoQuant post, miners have taken out about 1,750 BTC from their wallets during the past day. The relevant indicator here is the “miner outflow,” which measures the total amount of Bitcoin that miners are transferring out of their wallets currently. The counterpart metric of the outflow is called the “inflow,” and it naturally tracks the total number of coins going into the addresses of these blockchain validators. Here is a chart that shows the trend in the Bitcoin miner outflow, as well as the inflow, over the last few weeks: Looks like the value of the outflow has been pretty high in recent days | Source: CryptoQuant Whenever the miner inflow has a high value, it means that this cohort is depositing a large amount of Bitcoin into their wallets. Such a trend, when prolonged, can be a sign that the miners are accumulating right now. Naturally, this can have bullish implications for the price. When the outflow is high, on the other hand, it suggests that a large amount of the asset is exiting from the supply of the miners. Generally, the main reason why these holders transfer their coins out of their wallets is for selling-related purposes, so this kind of trend can be bearish for the cryptocurrency’s value. In the above graph, it’s visible that the miner inflow has been at relatively low values during the past day, implying that these investors aren’t depositing any significant amounts to their wallets. Related Reading: Bitcoin Binary CDD Stays Low, Here’s What This Means The miner outflow, however, has registered a pretty high spike in the same period. In total, around 1,750 BTC ($47 million) has exited the supply of the miners with this surge in the indicator. Since there haven’t been any inflows to counteract these outflows, a net amount of the asset has now left the miners’ wallets. This would mean that if the outflows were made for selling purposes, a net bearish effect should appear on the price. An indicator that helps better identify whether these transfers were for selling or not is the “miner to exchange flow,” which tracks only the miner outflows heading towards centralized exchanges. Usually, this cohort uses the exchanges when they want to take part in distribution. As shown in the above chart, however, the metric has remained low recently, meaning that these outflows haven’t directly entered into the wallets of these platforms. Though, the quant has discovered that the destination wallet of the 1,750 miner outflow made another transfer, which was indeed towards an exchange. “There is a high probability that 1,750 BTC ultimately went to Binance,” explains the analyst. Related Reading: This Bitcoin Support Line Is Still Active, Bullish Signal? When these outflows took place yesterday, Bitcoin was above the $27,000 level. Following them, however, the asset has observed a plunge and is now below this mark, suggesting that this latest selling pressure from the miners may have been behind the decline. BTC Price At the time of writing, Bitcoin is trading around $26,800, up 2% in the last week. BTC has declined today | Source: BTCUSD on TradingView Featured image from Brian Wangenheim on Unsplash.com, charts from TradingView.com, CryptoQuant.com

Bitcoin Miners Continue To Sell, Bearish Sign?

On-chain data shows that Bitcoin miners have continued to sell recently, something that could be bearish for the cryptocurrency’s price. Bitcoin Miners Have Been Shedding Their Reserves Recently As pointed out by an analyst in a CryptoQuant post, there has been some intense pressure from miners in recent days. The relevant indicator here is the “miner reserve,” which measures the total amount of Bitcoin that’s currently sitting in the wallets of all miners. When the value of this metric goes up, it means the miners are depositing a net amount of coins into their addresses right now. Such a trend can be a sign that these chain validators are accumulating currently, and hence, can have bullish consequences for the asset’s value. On the other hand, the indicator’s value going down implies that these investors are transferring some BTC out of their wallets at the moment. As the miners generally only withdraw their coins whenever they want to sell them, this kind of trend can be bearish for the price of the cryptocurrency. Now, in the context of the current discussion, the actual metric of interest is the 14-day rate of change (ROC) of the Bitcoin miner reserve, which tells us about the pace at which the indicator is registering fluctuations, as well as the direction these fluctuations are in (negative or positive). Related Reading: Bitcoin Tweets Surpass Dogecoin Despite Meme Coin Craze Here is a chart that shows the trend in the 14-day ROC BTC miner reserves over the last few months: Looks like the value of the metric has been quite red in recent days | Source: CryptoQuant As shown in the above graph, the 14-day ROC of the Bitcoin miner reserve has had a negative value during the last few days. This means that the holdings of these chain validators have been decreasing in this period. Not too long ago, though, the indicator had some positive values, implying that these chain validators had been buying. Things changed once the asset’s price started to slip below the $30,000 level, however. When the price hit around $28,000, the turn towards red values came for the indicator, implying that the miners may have possibly joined in on the market-wide selloff. Following the selling spree from the miners, the asset’s value continued its decline and dropped all the way to the low $26,000 level. Since then, however, the decline has stopped, possibly suggesting that those levels may have offered the local bottom for the asset. The selling pressure from the miners has also started slowing down recently, as the latest negative spike of the metric has been lesser in scale than the previous ones, which can be seen in the chart. During the past day, the asset’s price has also bounced back above the $27,000 level again, implying that the market may now be able to absorb the current levels of selling pressure from this cohort. Related Reading: PEPE Outperforms Bitcoin In Social Media Buzz, Triggers Bullish Run For Frog Coin This kind of trend had also been seen during the selloff back in March, where the price formed a bottom and then rebounded up as the selling pressure died out from the miners. It now remains to be seen whether the miners will decrease their selling in the next few days (like back in March), or if they will continue to sell, possibly causing more bearish price action for the asset. BTC Price At the time of writing, Bitcoin is trading around $27,300, down 2% in the last week. BTC has shot up during the past day | Source: BTCUSD on TradingView Featured image from iStock.com, charts from TradingView.com, CryptoQuant.com

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