Bitcoin price tried to break out of range before retesting key support, according to crypto analyst Big Smokey. Is it a trend change on hand or will the price continue to consolidate? The analyst seeks the answer to this question.
Bollinger Bands tight for bitcoin price
The Bollinger Bands on the daily timeframe have narrowed. This week’s rally to $21,000 was the expansion or spike in volatility most traders were expecting. As par for the course, after breaking out of the upper arm, the price pulled back to test the midline/middle band (20MA) as support. Despite the strength of the move, the price remains capped below the 200-MA (black line). Also, it is currently unclear whether the 20-MA will act as support for Bitcoin price.
BTC daily chart with Bollinger Bands / Source: TradingViewAfter jumping from nearly an all-time low at 25.7, the weekly RSI continues to rise. The bullish divergence identified in the previous analysis also continues. A similar trend is held by BTC’s weekly MACD.
On the same chart, we can see that the latest weekly candle is on its way to create a weekly high. If the candle closes above the previous five-week high range and the price continues with a daily or weekly close above $22,800 in the coming weeks, it likely means a trend reversal.
BTC weekly chart / Source: TradingViewMore consolidation for Bitcoin price next?
On the daily time frame, BTC’s Guppy multiple moving averages (GMMA or Super Guppy) indicator is eye-catching. There is a compression in the short-term moving averages. Also, they are converging with the long-term moving averages. This typically indicates an upcoming directional move or, in some cases, an emerging macro trend reversal.
BTC daily chart / Source: TradingViewOver the past few weeks, Bitcoin’s “record low volatility” has been the talk of the town. Also, when Bollinger Bands, GMMA and BVOL are used, the tighter price range indicates expansion. However, in which direction remains a mystery.
As you follow on Kriptokoin.com, Bitcoin has been trading in the range of $ 18,600–24,500 for 36 days. In terms of technical analysis, the price stays near the middle of this range. The move to $21,000 has not set a significant daily high or escaped from the current range, which is essentially a sideways drop. The price is hovering above the 20-day moving average for now. However, we have yet to see the 20-MA cross above the 50-MA. Also, much of the October 26 rally was back to the $20,000 low.
Bitcoin price daily chart / Source: TradingViewA more believable development depends on Bitcoin breaking out of the current range block to test the 200-MA at $24,800. Also, it’s important that he finally attempts a flip to support the moving average. Further expansion of the $29,000-$35,000 range will give confidence to the bulls looking for a clearer sign of a trend reversal. Until that happens, its current move consists of more consolidation pinned by resistance stretching as high as $24,800.
Bitcoin on-chain data says backlog
Like bitcoin price, the MVRV Z-Score has bounced from -0.194 to -0.023 in the past three months. The on-chain metric reflects the ratio of BTC’s market capitalization to actual capitalization.
Bitcoin 3-month MVRV Z-Score / Source: GlassnodeIn short, if Bitcoin’s market cap is measurably higher than its actual value, the metric enters the red area, indicating a possible market peak. When the metric entered the green zone, it indicated that the current value of Bitcoin was below its actual price. Thus, it probably signals that the market is near the bottom.
Bitcoin MVRV Z-Score / Source: GlassnodeAccording to the MVRV Z-Score chart, compared to Bitcoin price, the current -0.06 MVRV Z-Score is in the same range as previous multi-year lows and cycle lows.
Reserve Risk metric
The Bitcoin Reserve Risk metric shows how ‘confident’ investors compare to the market price of BTC. When investor confidence is high but the price of BTC is low, the risk of reward versus buying and holding BTC or Bitcoin attractiveness enters the green area.
Reserve Risk moves into the red area when investor confidence is low but price is high. Historical data shows that when Reserve Risk enters the green zone, creating a Bitcoin position is a good time to establish a position.
Bitcoin 6-Month Reserve Risk / Source: GlassnodeRight now, over the past six months, we’re seeing the metric form what investors might describe as a bottom. At the time of writing, reserve exposure is rising towards 0.0009. Also, moving into the green zone, typically at the 0.001 threshold, marks the beginning of a recovery.
Bitcoin Reserve Risk / Source: GlassnodeWhat is the future for bitcoin price?
Multiple data points indicate that the Bitcoin price is undervalued. It also signals that it is still in the process of forming a bottom. However, none of them confirm that the real market bottom is inside.
This week and previous months, multiple Bitcoin mining businesses have publicly announced the need for debt restructuring, the possibility of missed debt payments. Some even pointed to potential bankruptcy. Meanwhile, most public miners have been selling most of their mined BTC since June. Recent threads on Compute North and Core Scientific address solvency issues among industrial miners. These also imply that the Bitcoin price is still at risk.
Glassnode data shows the total size of miner balances hovering around 78,400 BTC. According to Glassnode, in case of ‘income stress’ miners are likely to be forced to liquidate tranches of these reserves on the open market. Also, the on-chain effect on Bitcoin price is likely to be the next catalyst for a sell-off that will push it down to new year lows.
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