YEREVAN (CoinChapter.com) – Bitcoin (BTC) price has consolidated sideways since Nov 11 while holding above $16,000. Most analysts treat it as a signal of the cryptocurrency bottoming out. But technicals, including the descending triangle setup shown below, estimate a further drop toward $10,000.
On-Chain Bitcoin Metrics Are Bullish
Willy Woo, the co-founder of investment firm CMCC Crest, asserted that the bottom is close for BTC, citing on-chain metrics.
The analyst noted that Bitcoin touched the Market Value/ Realized value (MVRV) bottom twice year-to-date. In detail, MVRV is an indicator that tracks the ratio between “Bitcoin’s market cap against the capital invested into the network,” says Woo.
The price jumps and the MVRV spikes are correlated. Thus, many analysts use MVRV to identify the bull market tops and bottoms. Typically, the market bottom is when the ratio hits 1.0 or drops lower, as seen in the chart below.
The analyst called Bitcoin’s current value a “buy zone,” albeit encouraging traders to “use the charts at [their] own discretion.”
Under this signal we were in already bottoming (1) until the latest FTX white swan debacle brought us back into a buy zone (2). […] Use these charts at your own discretion, we are in an unprecedented time of deleveraging. Past cycles do not necessarily reflect future ones.
“Bottom” Does Not Mean Bull Run
Despite favorable on-chain metrics, analysts are not keen on calling another bull cycle just yet. Pentoshi, the founder of North Node Capital, asserted that while BTC might be bottoming out, the “time aspect of it” is unlikely to be close.
Probabilities say we likely spend a lot of [time] sideways. So while it is popular to call bottom weekly and say the bottom is close, there isn’t a lot to support that, at least on the time axis. Only the price axis. 69k to 16k doesn’t take a genius to realize we are closer to a bottom.
The analyst also cited macroconditions that triggered the last bull run.
We have to ask what conditions lead to the last bull market. Do those conditions exist now, or will they be in such extremes again? The entire globe locked down w/ stimmies, QE, rates negative or at 0, PPP “loans,” 120B a month in accommodation from Fed.
commented the expert.
What affected the Bitcoin price?
As CoinChapter reported previously, the FTX collapse wreaked havoc on the crypto market, causing fear and liquidity issues across the board and spreading contagion to several major lending platforms.
While FTX founder Sam Bankman-Fried blamed the collapse on an unusually widespread “bank run,” the results were devastating, wiping a quarter off the total crypto market cap since Nov 8, which stood at merely $776 billion on Nov 28.
Additionally, several macroeconomic headwinds are likely to hinder Bitcoin’s upside attempts. For example, Fed’s hawkish quantitative tightening policies tend to hurt Bitcoin due to the latter’s correlation with the risk-on assets.
Furthermore, the unstable geopolitical situation triggered by Russia’s invasion of Ukraine has been exacerbated by additional hotspots in the East. The rising tension between North Korea and Japan strained the regional markets.
Adding fuel to the fire, China reinstated its Covid-zero policy amid new regional outbreaks. The possibility of a new lockdown fed investors’ fears as Asian stocks slid on Monday. Katrina Ell, the senior economist at Moody’s Analytics Inc., told Bloomberg that Beijing’s ongoing policy of Covid-zero mobility curbs is an impediment to stabilizing domestic demand.
All the factors mentioned above provide a clearer Bitcoin bottom prediction. While the flagship crypto might not have much further to fall, it is too soon for a new bull run. Combined with geopolitical instability, macroeconomic cues predict a sideways consolidation while the dust settles.
Thus, crypto investors should arm themselves with more patience and wait out the storm.
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