Bitcoin [BTC] may be at the end of something, but this also warrants caution
Bitcoin noted some upside in the past 24 hours after a brief recovery back above $20,000. Investors who have been closely following the results over the past few weeks may have noticed its confinement within a tight range. However, it may be nearing the end of this series and things are about to get more interesting.
Bitcoin has been stuck between the $19,000 and $24,000 levels for more than a few weeks now. It broke out of this range only a few times since June, meaning the narrow range has extended for at least three months.
Bitcoin’s historical price action has seen periods where the price trades within such a narrow range, followed by the return of directional price movements with high volatility. Now, if the same observation applies to the prevailing range, the cryptocurrency may just be at the end of the same as well.
Furthermore, an analysis of BTC’s long-term outlook suggests that it has interacted with its long-term support.
#BTC KISSING 12-YEAR SUPPORT! pic.twitter.com/r1ohknSgmC
— MMCrypto (@MMCrypto) 17 September 2022
Previous instances where price has interacted with the same support band were characterized by long bearish weeks. A repeat of the same would thus produce a large pullback, one that would thus produce a bear trap before the next big upside.
The aforementioned observation is also reflected in Bitcoin’s long-term price model. At the time of writing, BTC’s price was trading below the realized price zone. This is more evidence that the cryptocurrency is near the bottom of the ongoing bearish cycle.
Source: Glassnode
BTC’s MVRV ratio also seemed to indicate that it has regained strength. Now this is not necessarily a guarantee that the price is now on a recovery path. In fact, some of Bitcoin’s calculations indicate that the bears are not yet finished.
For example, the number of addresses with more than 1000 BTC has dropped significantly since the beginning of September.
Source: Glassnode
Addresses with more than 1000 BTC have so far dropped to the lowest level in 4 weeks.
Furthermore, BTC’s new address calculation highlighted that the number of new addresses has decreased. These observations suggest that there are outflows and slowing growth. This further reinforces the prevailing short-term bearish narrative for the world’s largest cryptocurrency.
Conclusion
Although the long-term calculations indicate that BTC is at the end of its current range, the short-term calculations warrant caution. Many traders are bound to get too excited and this can lead to an increase in leveraged long positions. Such an outcome would also be ripe for an unexpectedly large sale that would lead to long liquidations, and trigger more downside.
The aforementioned scenario would pave the way for a long bearish wick setup before the next big rally. A potential option, but not a guarantee. Such a case would also provide an opportunity to buy at a steeper discount.
