Has Bitcoin already hit bottom?
Metrics show some patterns that indicate Bitcoin could be bottoming out. The coin has been trading below its realised value for 35 days in a row.
The realised value is the average price at which the coins were bought. This number is now above the market price since many users continue to hold Bitcoin after purchasing it, despite experiencing unrealised losses. This pattern repeats in cycles once every four years, after which the coin starts a new rally.
During the rally, speculators and 'casual tourists' (those who hold coins for less than three months) become active. When the rally ends, they sell off their holdings. This group's wallets now hold less than 20% of Bitcoin's total value.
Meanwhile, hodlers redeem Bitcoin as the price falls and withdraw it to cold wallets, where it 'ages'. A group of investors with holdings that are three months old or more now has over 80% of Bitcoin's total capitalisation. This is also a typical pattern of the bottom forming.
In the hope of a quick bounce, crypto users reactivated, and the price rose by 25% in July.
But not everything is as rosy as it may seem at first glance. Firstly, the US Fed will raise its interest rate again next week, and it may do so in a 1% increment, something that hasn't been seen since 1981. On the tails of the Fed tightening monetary policy, the US dollar will have more arguments to strengthen further against most financial instruments (read more here).
Second, Bitcoin takes an average of 197 days to form a bottom, and the most significant level for a rebound is a drop of 80% from its high. For the high set in November 2021, that target is $14,000. When buying Bitcoin, investors should be prepared for both a prolonged consolidation and a possible continued decline.
StormGain Analysis Team
(crypto trading, exchange and storage platform)