Bitcoin (BTC) has declined, and the price of BTC is likely to remain in its current downtrend. But as I mentioned last week, when no one is talking about bitcoin, it’s usually the best time to buy bitcoin.
Over the past week, the price made another drop, falling below $19,000 on September 6th, and BTC bulls are currently struggling to regain support at $19,000-$20,000. This week, Federal Reserve Chairman Jerome Powell reiterated the Fed’s dedication to literally doing whatever it takes to combat inflation “until the job is done,” and market analysts lowered their interest rate hike predictions by 0.50 basis points. has been increased from 0.75.
Basically, interest rate hikes and quantitative tightening are meant to crush consumer demand, which ultimately leads to a reduction in the cost of goods and services, but we are not there yet. Additional rate hikes, plus QT are likely to drive the stock market down, and given their high correlation to the price of bitcoin, further downside is the most likely outcome for BTC.
So, yes, there isn’t a strong investment thesis for bitcoin right now from a price action and short-term profit perspective. But what about those who have a longer investment horizon?
Let’s quickly review three charts that suggest investors should buy bitcoin.
Bitcoin Investor Tool: Two-Year MA Multiplier
Bitcoin price is currently down 72% from its all-time high of $69,000. In previous bear markets, the price of BTC saw a 55% correction (July 21), a 71% drop by March 2020, and an 84% drop in December 2018. Although brutal to bear, the current 72% correction is not out. Criteria compared to previous drawdowns from all-time highs.
Comparing this drawdown data against the two-year MA multiplier, one would see that the price dropped below the two-year moving average, formed a trough, and then followed for several months before resuming the 12-year uptrend. consolidated for
These areas are “shaded” areas below the green two-year moving average. Zooming in on the right side of the chart, we can see that the price is again below the two-year moving average, and while there is no sign of a “trough” being dug, if historicals are to be believed, the price is currently Can be described as a consolidation zone.
golden ratio multiplier
Another interesting moving average and Fibonacci sequence-based indicator that suggests the price of bitcoin is undervalued is the golden ratio multiplier.
According to Philip Swift, the creator of LookintoBitcoin:
“The chart explores the adoption curve and market cycles of bitcoin to understand how the price may behave on medium to long-term time frames. In doing so, it identifies areas of potential resistance to price movements. It uses multiples of the 350-day moving average (350DMA) of the bitcoin price.
Swift further noted that “the specific multiplication of the 350DMA has been very effective in picking out intracycle highs and major market cycle highs for the price of bitcoin over time.” Essentially, the indicator is:
“An effective tool because it is able to demonstrate when the market may overgrow in the context of bitcoin’s adoption curve growth and market cycle.”
Currently, BTC price is trading below the 350DMA and similar to the two-year MA multiplier. Dollar-cost-averaging has proven to be a wise way to position bitcoin at extreme lows.
A look at Bitcoin’s one-week relative strength index (RSI) also shows that the asset is almost oversold. When comparing the weekly RSI to the candlestick chart of BTC, it is clear that accumulation during oversold periods is also a profitable strategy.
related: A Bullish Bitcoin Trend Reversal Is Far Away, But This Metric Is Screaming ‘Buy’
Bitcoin’s MVRV Z-Score
An on-chain indicator called MVRV recently hit its lowest score since 2015. The metric is essentially the ratio of a BTC’s market capitalization to its actual capitalization, or in simple words, the amount people paid for BTC compared to the value of the asset today.
According to analyst “JJ” at Jarvis Labs, Bitcoin’s MVRV (market capitalization versus realized capitalization) indicator is printing very low readings, and the analyst elaborated:
The MVRV Z-score provides insight into when bitcoin is undervalued and overvalued relative to fair value. According to analytics firm Glassnode, “When the market price is significantly higher than the actual price, it has historically indicated a market top (red zone), while the opposite has indicated a market bottom (green zone). ”
Looking at the chart, the current -0.16 MVRV score is very similar to the previous multi-year and cycle bottoms for the bitcoin price in comparison to the price of BTC. A pure interpretation of the data suggests that Bitcoin is in the midst of a bottoming process and possibly entering an early stage of accumulation.
Of course, its price could fall further, and bearish factors that are affecting the stock markets will continue to influence crypto prices as well, so rely on any of the indicators mentioned today as a solitary argument for investing. should not be done.
The crypto market is in bad shape, and it seems unlikely to change in the short term, but a market bottom is also impossible for most traders. Therefore, what investors should be looking for is a confluence between a variety of metrics and indicators that align with one’s thesis.
At the moment, most of Bitcoin’s on-chain metrics and technical analysis indicators suggest sensible dollar-cost-averaging in a manageable position. The key is risk management. Don’t invest more than you can afford to lose, and you won’t have to worry about losing your shirt.
This newsletter was written by Big Smokey, author of The Humble Pontificator Substack and Cointelegraph’s resident newsletter writer. Every Friday, Big Smokey will write market insights, trending how-tos, analysis and early-bird research on potential emerging trends within the crypto market.
Disclaimer. Cointelegraph does not endorse any of the product content on this page. While our aim is to provide you with all the important information we can obtain, readers should do their own research and take full responsibility for their decisions before taking any action relating to the company, nor should this article be invested in can be considered as advice.
