Market X-ray: Bitcoin finally breaks out of 4-day range—what's next?
as always, the market newsletter is split into two parts: Bitcoin outlook by Joseph and on-chain analysis by Cole.
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The Bitcoin Outlook, by Joseph Young
Marathon Patent Group, an enterprise Bitcoin self-mining company in the U.S. bought $150 million worth of Bitcoin.
“By purchasing $150 million worth of Bitcoin, we have accelerated the process of building Marathon into what we believe to be the de facto investment choice for individuals and institutions who are seeking exposure to this new asset class.” - Merrick Okamoto, Marathon’s chairman & CEO.
A few days ago, MicroStrategy also bought $10 million worth of Bitcoin on the dip.
It is difficult to categorize these buy orders as institutional adoption per se, but the continuous demand for Bitcoin has clearly lifted its price in recent months.
Bitcoin comes off a rather complex correction, where it declined from $37,000 to below $30,000 in quick succession, with no clear reaction from buyers.
Volume trends suggest that a big fund or a big industry player likely took profit on a billion-dollar position.
Consecutive large sell orders were filed on Coinbase, causing the market to tank very quickly.
The market sentiment appeared to be dwindling, but Bitcoin saw a crucial response it much needed at $31,000.
In many ways, $31,000 was a do or die level for Bitcoin. If it consolidated below it, a deeper correction was probable.
But, Bitcoin fastly recovered from it, eventually surging past $33,800. This breakout was critical. Now, there is momentum for Bitcoin to feed off of to try a retest of $40,000 once again.
Key Bitcoin levels and things to watch
Bitcoin has been underperforming against Ethereum and the DeFi market in the past few days.
Today, Bitcoin finally broke out of the dreaded 4-day range, breaking above $33,800.
In the short term, there are four key resistance levels: $36,630, $37,800, $40,000, $42,000.
Ideally, Bitcoin makes its way towards $36,630 next, consolidates a bit, and moves towards $37,800~$38,000.
Otherwise, it faces slowing momentum, and with limited upside volatility, it faces the risk of a larger pullback below $30,000.
On-chain indicators wrap up
The SOPR is an indicator that measures whether investors have taken profit on their positions.
When the SOPR is low or close to zero, it means the market is not overheated.
In 2017, when the price of Bitcoin reached its previous all-time high at $20,000, the SOPR was incredibly high. This meant the market was overcrowded, sitting on large unrealized gains.
As more people took profit and the highly overleveraged market came tumbling down, Bitcoin crashed.
But this time, it is different.
The SOPR has already reset for Bitcoin. This paints a highly optimistic mid-term trend for Bitcoin. It shows that the current rally can be sustainable for a longer period.
As seen above from the SOPR chart from Whalemap, the SOPR is much lower now compared to 2017 and even the 2013 peak.
However, for now, there are no large Coinbase outflows, stablecoin inflows, and high Coinbase premium.
The combination of the absence of these three indicators suggest that the short-term price cycle of Bitcoin is not particularly bullish, and is more neutral.
Market X-Ray, By Cole Peteresen
Bitcoin’s price is finally picking up steam after a week of losses that ultimately sent it to sub-$29,000 lows just last Thursday.
The recent break below $30,000 struck panic into the heart of investors — many of which still suffer from the trauma of the 2017 blow-off top — and even caused some beloved traders on Crypto Twitter to risk-off and caution of further downside.
However, the buying pressure in the sub-$30,000 region proved to be quite intense, and allowed the benchmark cryptocurrency to see some massive momentum that is still driving it higher today.
On-chain data shows that there are a couple clear factors behind the recent selloff, including a massive spike in outflows from miners, as well as mounting resistance from some large whales.
Tracking the Ebb and Flow of Bitcoin Miners
Throughout the course of Bitcoin’s parabolic rally that led it from the sub-$10,000 region to highs of $42,000, selling pressure from its miners remained tempered.
This all changed the second Bitcoin’s price action became wobbly above $40,000, as data from analytics firm CryptoQuant indicates that the break below this level a few weeks back triggered massive inflows of selling pressure from miners.
This was likely done in an attempt to lock-in profits.
Courtesy of CryptoQuant.
As seen on the above chart, it appears that miners are also offloading Bitcoin at the present moment, which may be what is placing pressure on the crypto’s ongoing attempt to flip $34,000 into a support level.
Until miner outflows stabilize back at their median levels seen throughout the past several months, it’s going to take extra effort from bulls in order for Bitcoin’s price to see sustained momentum.
Let’s Go Whale Watching
Miners aren’t the only ones currently placing some pressure on Bitcoin’s price.
Today’s surge led BTC to highs of $34,850, which is just a hair below a “whale cluster” zone that was previously identified by Whalemap as a potential resistance level.
The swift rejection here confirmed that this level is, in fact, resistance, and that large holders may be keen on continuing to offload their holdings within the mid-$30,000 region.
The other levels that have similar clusters of whale activity are $36,290 and $37,834.
Image Courtesy of Whalemap.
Other Variables to Consider
Currently, selling pressure from miners and whales is placing some significant pressure on Bitcoin, but that doesn’t mean that it’s all doom and gloom for the cryptocurrency.
The trend of large corporations and public companies buying Bitcoin to hold as a reserve asset is still going strong, with the Nasdaq-listed Marathon Patent Group being the latest to purchase a sizable sum of the crypto.
As reported by The Block earlier today, the company acquired $150m worth of BTC using their cash reserves, with its CEO specifically referencing MicroStrategy as a source of inspiration for this purchase.
MicroStrategy also added 8-figures worth of BTC to their holdings during the latest selloff.
There are some macro factors that could place some external weight on the aggregated crypto market, however, with the stock market seeing some immense bear-favoring turbulence today for the first time in a while.
One trader noted that equities “got rugged” today, pointing to the below chart that shows the severity of the recent drop.
Courtesy of @PARABOLIT
The confluence of these factors makes me think it’s somewhat unlikely that Bitcoin is going to rip too much higher in the short-term. Ideally, BTC sees some further consolidation while miners temper their selling activity.
Joseph Young is a cryptocurrency analyst who has been in the space since 2014. He contributes to Forbes, CoinTelegraph, and a host of other top crypto news sites. Over his 6+ years in the space, he has built countless connections with industry leaders and has amassed over 100,000 followers on Twitter.
Nick Chong is a passionate crypto researcher who specializes in identifying and extracting conclusions from trends within the rapidly emerging DeFi-space. He has been involved in the crypto markets since 2016, and sources deals for a Vancouver-based crypto venture fund.
Cole Petersen first learned about Bitcoin in 2013 and began working in the space in 2017. While on a gap year as a student at the University of California, Irvine, he now leads LINKPAD, a venture capital fund, and does part-time work as an associate at BlockVenture.
Pepe of the Day:
Pepe the Frog has become the unofficial mascot of the crypto markets, so we feel it is only fitting to add a “Pepe of the Day” section highlighting only the finest and rarest Pepes.
Today’s featured Pepe: “We will knock out the bears.”