Bitcoin haters are ready to read its obituary, but on-chain data and other indicators suggest the current price range could be a good buy zone.
Like clockwork, the onset of a crypto bear market has brought out the “Bitcoin is dead” crowd who gleefully proclaim the end of the largest cryptocurrency by market capitalization.
The past few months have indeed been painful for investors, and the price of Bitcoin (BTC) has fallen to a new 2022 low at $17,600, but the latest calls for the asset’s demise are likely to suffer the same fate as the previous 452 predictions calling for its death.
Resolute Bitcoiners have a bag full of tricks and on-chain metrics they use to determine when BTC is in a buy zone, and now is the time to take a closer look at them. Let’s see what time-tested metrics say about Bitcoin’s current price action and whether the 2021 bull market was BTC’s last hurrah.
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What is Bitcoin?
Bitcoin is the world’s most traded cryptocurrency, representing a huge slice of the crypto market pie. It was the first digital coin and, as such, remains the most famous and widely-adopted
cryptocurrency in the world. The original gangster in whose footsteps all other coins must follow. The birth of Bitcoin was the genesis for an entirely new asset class, and a huge step away from forms of centralized control. Today, many advocates believe Bitcoin will be the inevitable future for the entire global financial system, although this – of course – remains to be seen.
Each Bitcoin is basically a computer file which is stored in a ‘digital wallet’ app on a smartphone or computer.
People can send Bitcoins (or part of one) to your digital wallet, and you can send Bitcoins to other people.
Every single transaction is recorded in a public list called the blockchain.
This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undo-ing transactions.
Some Traders Always Buy Bounces of the 200-week Moving Average
One metric that has historically functioned as a solid level of support for Bitcoin is its 200-week moving average (MA), as shown in the following chart posted by market analyst Rekt Capital.
As shown in the area highlighted by the green circles, the lows established in previous bear markets have happened in areas near the 200-MA, which has effectively performed as a major support level.
Most times, BTC price has had a tendency to briefly wick below this metric and then slowly work its way back above the 200-MA to start a new uptrend.
Currently, BTC price is trading right at its 200-week MA after briefly dipping below the metric during the sell-off on June 14. While a move lower is possible, history suggests that the price will not fall too far below this level for an extended period.
MVRV Indicates its Time to Start Accumulating
One final metric that suggests BTC may be approaching an optimal accumulation phase is the market-value-to-realized-value ratio (MVRV), which currently sits at 0.969.
As shown on the chart above, the MVRV score for Bitcoin has spent most of the time over the past four years above a value of 1, excluding two brief periods that coincided with bearish market conditions.
The brief dip that took place in March 2020 saw the MVRV score hit a low of 0.85 and remain below 1 for a period of roughly seven days, while the bear market of 2018 to 2019 saw the metric hit a low of 0.6992 and spent a total of 133 days below a value of 1.
While the data does not deny that BTC could see further price downside, it also suggests that the worst of the pullback has already taken place and that it is unlikely that the current extreme lows will persist for the long term.
Bitcoin Price Tumbled
Bitcoin tumbled below $23,000 on Monday, hitting its lowest level since December 2020, as investors dump crypto amid a broader sell-off in risk assets.
Meanwhile, a crypto lending company called Celsius has paused withdrawals for its customers, sparking fears of contagion into the broader market.
The world’s largest cryptocurrency bitcoin dropped below the $23,000 mark, according to CoinDesk data. At one point bitcoin fell about 17% to trade around $22,764. Some of those losses were later recovered, and around 4 p.m. on Wall Street bitcoin stood at $23,351 for a loss of 15%.
Over the weekend and into Monday morning, more than $200 billion had been wiped off the entire cryptocurrency market. The cryptocurrency market capitalization fell below $1 trillion on Monday for the first time since February 2021, according to data from CoinMarketCap.
Macro factors are contributing to the bearishness in the crypto markets, with rampant inflation continuing and the U.S. Federal Reserve expected to hike interest rates this week to control rising prices.
Last week, U.S. indices sold off heavily, with the tech-heavy Nasdaq dropping sharply. Bitcoin and other cryptocurrencies have tended to correlate with stocks and other risk assets. When these indices fall, crypto drops as well.
“Since Nov 2021, sentiment has changed drastically given the Fed rate hikes and inflation management. We’re also potentially looking at a recession given the FED may need to finally tackle the demand side to manage inflation,” Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC.
“All this points to the market not completely having bottomed and unless the Fed is able to take a breather, we’re probably not going to see bullishness return.”
Ayyar noted that in previous bear markets, bitcoin had dropped around 80% from its last record high. Currently, it is down around 63% from its last all-time high which it hit in November.
“We could see much lower bitcoin prices over the next month or two,” Ayyar said.