Markets
Bitcoin market is not yet ‘heavy’, but more consolidation is expected: analysts
BTC prices retreated below $70,000 during Wednesday morning Asian trading, but markets are not yet overbought, according to analyst James Check.
“Right now, using a variety of volume metrics as input, BTC Prices appear to be in line with fundamentals,” he said in a May 21 newsletter.
Furthermore, the market looks the same as it did at the end of 2020, he added.
In early December 2020, BTC prices rose to reclaim the 2017 all-time high of $20,000. It consolidated around that level for a few weeks before reaching a new peak of $30,000 on New Year’s Day.
Story rhyme?
During this recent cycle, BTC prices rose to nearly reclaim their mid-March peak of $73,738 but encountered resistance there, indicating positive momentum and potential to enter price discovery territory.
“Only seven days in all of history have had a closing price above this [$71,000]so we are really breathing rarefied air here,” said the analyst.
He added that “reaching a convincing high point is rarely successful on the first try” before stating that a period of “chopping wood” and a few significant attempts is very normal.
Additionally, the Network Value to Transactions (NVT) ratio suggests that bitcoin’s price is in line with its on-chain transaction yield, similar to conditions observed during late 2020.
Furthermore, the short-term holder’s Spent Output Profit Ratio (SOPR) shows that the market is in an “enthusiastic” but not “euphoric” phase, indicating a potentially sustainable uptrend.
This is a condition where a significant number of holders are caught off guard and purchase too many coins at too high a price.
The Glassnode analyst also mentions a “heavy” market condition where a significant number of investors hold loss-making assets. However, he notes that this situation has improved significantly, with just 6.6% of short-term holders’ supply now held at a loss, reducing the risk of panic selling.
More Chopsolidation to come
On May 21, fellow analyst “Rekt Capital” predicted that a weekly candle would close over US$71,500 “it would likely initiate the breakout of the reaccumulation range.” However, BTC prices had already fallen to $69,782 at the time of writing.
He added that history suggests BTC should consolidate within this reaccumulation range for a few more weeks.