Here are five trends that could put a stop to Bitcoin’s rally
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Although traders are undoubtedly still scarred by Bitcoin's 50 percent single-day crash in March, the cryptocurrency has mounted an impressive comeback ever since.
In fact, just the other day, it reached $7,470 — around 100 percent higher than the bottom established during the “Black Thursday” crash.
Unfortunately, some have begun to suggest that the crypto market's luck has run out.
Technicals & on-chain metrics suggest Bitcoin is about to reverse
Crypto trader Nunya Bizniz recently observed a confluence of four technical analysis-based trends that suggest Bitcoin's rally is coming to an end. They are as follows:
- Horizontal resistance: Bitcoin has encountered a horizontal resistance level at ~$7,300. This is where BTC bottomed in October prior to the infamous China pump. Historical supports turn into resistances, traders say, hence why Bitcoin's rally is on hiatus.
- Trendline: Per Bizniz, Bitcoin recently encountered a downtrend in line with the horizontal resistance. The downtrend has yet to be broken, which could drag the crypto market lower.
- 50-day moving average: To add to the above, Bitcoin has also failed to surmount the 50-day simple moving average of its price.
- Tom Demark Sequential “9” candle: The Tom Demark Sequential, a time-based indicator, just printed a “9” candle, which has historically marked reversals in the BTC market. A 9 candle was seen on the day BTC hit and reversed from $10,500 in February, and a 9 marked the $6,400 bottom in December 2019.
Furthermore, ByteTree — an on-chain metrics provider — suggests that Bitcoin is currently overvalued per their metrics, with BTC trading at a slight but a non-negligible 4.7% premium to the fair value of just under $7,000.
This fair value is calculated by weighing Bitcoin's Network Value-to-Transactions ratio, the transaction value, and the supply of the BTC network, according to a post from the site.
All these factors in tandem suggest that at the very minimum, the booming cryptocurrency market will see a short-term correction.
Demand for crypto is booming
Although there are these overarching trends, demand for Bitcoin has been booming, which could negate any technical and on-chain metrics if buy-side pressure keeps up.
Per previous reports from CryptoSlate, crypto-asset manager Bitwise has begun to see strong retail inflows into its products. Similarly, Michael Sonnenshein of Grayscale Investments, the firm behind the GBTC Trust, saw a “record-breaking asset raise this quarter.”
Furthermore, as I recently observed, multiple data points, from order book data and volume to Alexa rankings and Google Trends, are exhibiting signs that consumer demand in cryptocurrency is increasing at a rapid clip.
All data is pointing towards both retail and institutional demand for Bitcoin exploding.
This comes as BTC is about to see a 50% inflation cut and as monetary policy is more easy than ever — a perfect storm.
A quick thread ?
— Nick Chong (@_Nick_Chong) April 9, 2020
But again, it remains to be seen if this translates to bullish price action for Bitcoin as there's a chance selling could outweigh the growing demand.
