Opinion: Bitcoin’s rally from April surprised everybody as the price increased by 107% in under 45 days in a bear market. This made a lot of the users believe that it was the start of a bull run. However, a few people in the ecosystem think otherwise and are waiting for the confirmation of the start of the actual bull run.
But why isn’t this a bull run?
Bitcoin has risen dramatically, which shouldn’t come as a surprise considering the previous rallies. Usually, there is momentum behind such rallies, and the momentum reduces as time progresses, which leads into a correction phase. If it is a reversal of trend, then the price creates a higher high. In Bitcoin’s case, this hasn’t happened yet and hence a lot of users are waiting for the correction which is a confirmation.
Proceed With a Grain of Salt
History of price action gives an idea of the things to come, but it has to be taken with a grain of salt. The price of Bitcoin has a history of increasing significantly the year leading to halving. The third halving is set to happen on May 23, 2020, which leaves us with a year and a few days.
The chart attached below gives a similar view of the things to expect with Bitcoin’s price in the year 2020. From the charts, it can be clearly seen that Bitcoin was making higher highs and surging a year leading to the halving date.
The main focus on the chart is the parabolic move that Bitcoin has performed, not once, but thrice, and this is approximately a year away from the halving. This parabolic move always leads to a sharp correction, proceeded by a bull run, which is a longterm action. Looking at a short-term price movement, the price has undergone a correction of approximately 30%.
If the same is to repeat itself, and the price of Bitcoin corrects itself by 30% it would put the price of Bitcoin in the $5,800 ballpark. Bitcoin started this correction on May 15 but failed midway when a huge sell order was executed on Bitstamp, causing the price to dip by 20% in a few minutes.
The repetitive nature of price pattern is usually attributed to market psychology and the Bitcoin market largely runs on emotions. Moreover, there needs to be a higher low formed to further confirm the change in market trend.
Conclusion? Readers can be cautiously optimistic.
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Bitcoin’s on-chain/off-chain valuation indicators the key point of focus as coin heads to $13,000
With the rise in Bitcoin’s price, the rest of the cryptocurrency market has followed suit by displaying a green trend across the board. In a recent series of tweets by popular cryptocurrency analyst Adam Tache, users were informed about the top Bitcoin on-chain and off-chain valuation indicators, derived from on-chain valuation models.
The analysis touched on the Mayer Multiple created by dividing the price by the all-important – 200 day moving average. The current average Mayer Multiple stands at a figure of 1.39, which may climb higher. Looking at previous figures, the normal Mayer Multiple figures stated that if the value shoots up to 2.4, then Bitcoin eventually retraces back to a comfortable 1.5. The Mayer Multiple is usually considered as the original indicator used to clock the valuation of Bitcoin.
Another major indicator discussed in the thread was the NVT Ratio invented by Willy Woo, Partner at Adaptive Fund. The indicator is used to calculate Bitcoin’s prominence or value in the cryptocurrency space by evaluating the amount transacted on the blockchain as a “proxy for investment flow and bear and bull market cycles.”
At the moment, the NVT ratio for Bitcoin is in an abnormal region compared to the start of previous bullish patterns. The NVT ratio was above the “bear market” separator, which meant that the cryptocurrency was overbought. When Bitcoin is overbought, it usually means that the buying pressure is much higher than the selling pressure. Adam Tache opined,
“NVT signaling overbought is likely due to a number of factors — namely the proliferation of exchange-based, purely off-chain txs driving short-term price action.”
The analysis also pointed out the liveliness of the Bitcoin indicator created by Tamas Blummer. The indicator showed the inverse count of lost or ‘HODLed’ Bitcoin, while stating that when the ratio increases, long-terms holders of the cryptocurrency decrease their positions. The indicator conveyed accumulation of Bitcoin when the ratio decreased.
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