This is an opinion editorial Mike Ermolaev, head of public relations at the ChangeNow exchange and a contributor to Bitcoin Magazine.
After a month of consolidation around $20,000, a much-anticipated recovery rally has taken place for bitcoin price. Interestingly, it coincides with the previous cycle peak in 2017.
Short-term momentum remains favourable, while longer-term macro indicators suggest a stronger foundation may take time.
Bitcoin’s 66% drop from its all-time high has largely left speculators left behind, leaving only whales and strong believers.
However, a recent trend has seen short-term holders flock to the $20,000 area, where ownership is being transferred from sellers to more optimistic buyers.
At the same time, holders who have accumulated coins over the past six months refuse to liquidate their positions despite huge unrealized losses, suggesting they are less sensitive to market volatility.
The Meyer Multiple – a multiple of the current bitcoin price above the 200-day moving average – fell below 0.55 at the peak of this price correction, indicating that the market is trading at a 45% discount to the 200 daily moving average. Bitcoin price has historically formed cyclical bottoms under this level, but it is rare, occurring less than 3% of the time.
At the moment, bitcoin is assuming that level after being down for a while. This means that if history is any guide, the worst of the bitcoin bear market is likely to be over.
An interesting interaction also occurs when the cost basis for long-term holders rises above the total cost basis for the broader market (value received). For long-term holders to be truly worth, long-term holders are required to either buy coins above their cost basis or wait until higher-cost coins mature beyond the 155-day mark. Is. This is rare during a bear market.
In times of sufficient demand to offset market lows, continued consolidation and profit-taking, the realized value of long-term holders tends to climb higher. Historically, bearish divergence has been between 248 days and 575 days. A period of 17 days has been in effect for the current cycle, which is a relatively short time frame.
BTC price is determined by macro
Although we wanted bitcoin to be independent of traditional markets and macroeconomic indicators, this is not the case right now. This dependence has intensified, with the entry of major institutional players and their large amounts of liquidity. Therefore, the behavior of digital assets is influenced by global liquidity flows.
This is why the M2 money supply, which consists of less liquid money including physical cash, deposits and bank savings accounts, can be a leading indicator of bitcoin’s price movement.
Furthermore, as we can often see on ChangeNOW, the S&P 500 and bitcoin price are closely related. From a larger perspective, the S&P is driven by the consolidated balance sheets of major central banks. In general, the rise of the S&P 500 is linked to the expansion of central bank balance sheets and the same is true for bitcoin.
So, you can get a sense of the future of bitcoin by monitoring the balance sheet charts of consolidated central banks.
ground level
In analyzing bitcoin’s on-chain activity, in ChangeNow we can see that long-term holders, who are less affected by bitcoin’s price fluctuations, never left the market, while short-term speculators have taken the lead in the recent sell-off. participated during, allowing more optimistic buyers. to enter. Meanwhile, when we look at the global liquidity flows emanating from major central banks, we can understand what is happening with the price of bitcoin, as well as what will happen in the near future. It doesn’t matter whether you are a strong long term bull, a capitulating seller, a new buyer or just looking from afar, we all need to understand the logical side of this chaotic bitcoin market.
This is a guest post by Mike Ermolev. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.