Where is Bitcoin Going?

What stage of the market is Bitcoin in right now?

We've all been asking this question in the last few weeks, as uncertainty is shaping the price action of the most followed asset among cryptocurrencies. BTC/USD, in fact, is moving in a maxi-range from which it does not seem to want to exit very soon and which does not allow us to make speculative forecasts. So let's carefully analyze the elements in our possession and try to give a concrete answer to the question asked previously.

Technical Analysis 

As for the BTC/USDT chart, it is trading in a very wide price range from approximately $40,000 to $52,000. From a weekly point of view, the closing of the last candle is not promising as it occurred below the previous low. Furthermore, the 50-day moving average (MA50) crossed the 200-day one, effectively marking a Death Cross. It can therefore be said that these signals do not portend anything positive as regards price action. Indeed, certainly bearish signals arrive from the chart, which can only be denied by the recovery of the $52000 level. In other words, if we only considered the technical analysis, we would expect a laterality, or descending phase, which could last several weeks. If the support at $40,000 does not hold, the scenario of a further leg-down could arise and the subsequent price levels could then be $34,000 and $30,000.

On-chain Analysis 

On-chain analysis, on the other hand, provides us with data that contrast a lot with those of technical analysis. In particular, looking at the graph showing Bitcoin's outflow from centralized exchanges it is impossible not to notice the continuing downtrend. The quantity left on the exchanges appears to be somewhat limited and this would lead to the assumption that, due to the reduction in supply, the price should have been much higher than the current one. As can be seen, from 2020 until mid-2021 there was an inverse correlation between the amount of BTC available on exchanges and the price of the asset. Since August 2021, however, this correlation has disappeared and, although the quantity available is in a continuous downtrend, since November the price has fallen.

These data are confirmed by the report on the change in the liquid supply, which has always had a direct impact on the price. Historically, in fact, abrupt reductions in supply corresponded to steep rises in the graph. This is also (obviously) the other way around, that is, when there has been an increase in liquid Bitcoins, the price has been negatively affected. Here too, from November 2021 to today there has been a continuous and significant decrease in the graph, which is not correlated to a rise in the price.

Basically, the On-chain analysis provides us with a different point of view than the technical one and, according to the data, a small increase in demand would be enough to trigger a leg-up in the price. If public interest were to increase and then return to the levels of early 2020, the Supply-Shock scenario would become likely.

---> Want to know what a "Supply Shock" scenario is? Read: A Supply Shock Scenario

Conclusions

To explain the above phenomena, it is necessary to consider the movements of investors, especially institutional ones. These entities move large capital and do so mostly over-the-counter (OTC), ie without going through the order books of the exchanges. Therefore, the buying or selling movements are not visible in the exchanges' balance sheets and have repercussions on the market after a few days. All this, therefore, explains why when a whale buys or sells OTC there is no impact on the volumes handled but the price is still affected by the change.

A consequence of the phenomenon just described is certainly the decrease in intra-day trading volumes recorded on exchanges. In reality, the lower interest from retail investors in recent months compared to the beginning of 2020 also weighs on these volumes. In any case, the final effect (lower trading volume) creates some non-ignorable consequences on the price of Bitcoin. Among these there is obviously a certain volatility which usually turns to the downside. In the opinion of the writer, we are in a stalemate that cannot last long. The available reserves are not infinite and, unless some whale decides to resell a large amount of bitcoin at a "low" price compared to a few months ago, these will run out. Therefore, a move in the short or medium term is to be expected which will determine the direction of the next period.

And did you do your analysis? How will Bitcoin move in your opinion?

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