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When to expect a bitcoin rally? A look at indicator data and expert opinion

Nov 16

Tags: #cryptocurrency market forecasts #bitcoin price

On October 25, the bitcoin price crossed the $20,000 milestone. Many market participants probably wondered whether this was a full-fledged reversal or an impending "false out". PythagorasNews analysed the most relevant onchain indicators, gathered interesting opinions and found out when to expect the price of the first cryptocurrency to recover.

Factors in the coming bitcoin rally

In the past, bitcoin has been seen as a defensive asset. Indeed, until January 2020 and during the relatively prosperous year of 2021, the first cryptocurrency was quite often negatively correlated with the "barometer of the US economy", the S&P 500 Index. 

At the beginning of 2022, the Fed's rate hike began in earnest. Aimed at lowering inflation, the "expensive money" policy put serious pressure on global markets. Bitcoin was no exception - its price has fallen 56% since the beginning of the year and 70% from its all-time high of around $69,000. The S&P 500 is down more than 20% in 2022. With US monetary policy tightening, investors began to see digital gold more as a risky asset alongside equities and commodities. Many were looking to "get into cash", while some players saw "safe haven" in highly-rated bonds and precious metals.

CoinGecko analysts observed that the cryptocurrency market's correlation with the S&P 500 Index has also declined slightly, from 0.92 to 0.85. LookIntoBitcoin experts have conceded that bitcoin has the potential to break the link to traditional risk assets. This could happen as investors realise that most of the threats come from governments and fiat currencies.

 

On another positive note, Tesla reported as part of its third-quarter reporting that it continues to hold its first cryptocurrency worth $218 million on its balance sheet. Michael van de Poppe, founder of trading platform Eight Global, sees this as a strong signal.

In his opinion, if the biggest electric car manufacturer is not in a hurry to sell digital gold, then the rest of the market should keep their cool.

Onchain analysis

Many indicators are signalling that the bottom of the cryptocurrency market's bearish phase has been reached. Back in July, the Pewell multiple fell to mid-December 2018 levels, when bitcoin was trading just above $7000. A similar signal is shown by the long-term RHODL Ratio metric, whose current values coincide with those of early 2019 - the bottom of the bearish phase of the previous market cycle. The Reserve Risk indicator has reached its lowest level ever. This means that long-term investors have little or no motivation to sell digital gold. MVRV indicates that the realised capitalisation of bitcoin is higher than the market. Previously, similarly low marks of the indicator coincided with extremes of previous bearish phases.

According to the researchers, the current values of the indicators "reflect a very attractive entry point for investors ready for a new wave of bitcoin appreciation". Another important onchain factor: the total amount of bitcoins lost as well as digital gold in the wallets of long-term crypto-investors has reached a five-year high. An increase in metric values suggests a decrease in the active market supply of bitcoin. This promises an optimistic outlook for the price of the first cryptocurrency, assuming increasing or unchanged demand.

Conclusions

Experts' opinions are often subjective and vary considerably, which is reflected in the breadth of the predicted price range. Such predictions should therefore be treated with a certain amount of scepticism. The market continues to be heavily influenced by the Fed's rate decisions, as well as the geopolitical situation. Bitcoin is likely to rebound quickly on the back of US monetary policy easing, which will happen sooner rather than later.

It is well known that markets are cyclical. Therefore, a trend reversal is not far off. Long-term investors should be encouraged by the fact that most onchain indicators point to a deep oversold bitcoin.

 

Author: Helena Kopecka