Author: BitpushNews Asher Zhang
Recently, the cryptocurrency market has experienced a significant decline, leading to high attention on the future market trends. This article mainly discusses three issues: Where is the bottom for Bitcoin? What are the major events for the remainder of this year and next year that will impact the cryptocurrency market? And what valuable information can be derived from on-chain data and the Bitcoin halving cycle?
Where is the Bottom for Bitcoin
On August 17, Bitcoin experienced a sharp decline, breaking through the 200-day and 200-week moving averages (from a technical analysis perspective, the MA200 is an important bull-bear dividing line). This article previously pointed out in the "Why is the $30,000 pressure level so important? XRP may lead the next bull market" that "the reason $30,000 is important for Bitcoin is that it is likely the bull-bear dividing point; breaking the previous high effectively enters the early stage of a bull market, failure to break effectively keeps it in the bear tail." In fact, despite the technical analysis indicating that BTC standing above the MA200 can be considered a sign of the start of a bull market, the price that can truly be considered the bull-bear dividing point in this round is still $30,000. This view remains valid, and we will now focus on discussing the bear market bottom price for Bitcoin.
According to Bitpush's report, Galaxy Digital pointed out that $25,000 is a key level to watch, as it has repeatedly acted as a technical support and resistance level since May 2022, and Bitcoin's flash crash on Thursday (August 17) found support here. When looking at Bitcoin supply on-chain, this level also stands out. 22% of Bitcoin's supply changed hands between $25,300 and $31,575.
Bitpush also reported that cryptocurrency influencer traders pointed out: In a stock market pattern, a decline is usually the most common way for the market to restore volatility, especially when the logic of an uptrend is disrupted, a decline is almost inevitable. Although Bitcoin has experienced a clear technical breakdown, the trend of the reversal is most likely to be a search for a new range of volatility, rather than a one-sided decline. Due to the significant damage to the bullish forces in this round, the market may need to undergo a long period of volatility after the downward reversal in order to achieve a decent rebound. This adjustment is the final shakeout before the start of a new market trend. Against the backdrop of the increasing heat from the entry of mainstream players like PayPal into the stablecoin field and the approval of a Bitcoin ETF, the current decline resembles the historical scenario of "reversing to pick up passengers" before institutional entry.
Overall, both of the above analyses basically believe that Bitcoin is not far from the bottom, and the consolidation period will be relatively long. This article is generally in line with this view, with the main difference being the bottom price and time for Bitcoin. This article believes that the main support for BTC in this round should be around $23,300.
In fact, mining data is the most valuable reference for judging the bottom of Bitcoin. If we consider Bitcoin as a commodity, then the average cost price of miners can be considered as the production cost of this commodity, and the support at this level will be the strongest. According to Glassnode data, the Bitcoin: Difficulty Regression Model indicator shows that the average cost price of miners is around $23,300. This indicator considers Bitcoin mining difficulty as the ultimate refinement of mining "price," using a single number to explain all mining variables, thus reflecting the average production cost of BTC by the mining industry, without the need to consider mining equipment, electricity costs, and other factors in detail.
Major Events Impacting Market Trends This Year and Next Year
As Bitcoin begins to enter the financial industry and traditional financial institutions start to get involved in the crypto business, the macro market's impact on Bitcoin is becoming increasingly intertwined. However, Bitcoin is not entirely in lockstep with the macro market, so how should we view the relationship between the two?
This article believes that the cyclical regulation of the Federal Reserve is an external factor affecting Bitcoin, while the cyclical effect produced by Bitcoin's halving mechanism is relatively more internal; currently, Bitcoin's internal cyclical nature is stronger than external cyclical influences. If the internal and external cycles are in sync, then Bitcoin's cyclical effect will be more pronounced; if the two cycles conflict, then Bitcoin will mainly exhibit its internal cyclical characteristics, but its cyclical effect will be weakened. Despite the fact that Bitcoin has already surpassed the MA200 and many Wall Street institutions have entered the crypto market, such as PayPal, the hawkish signals from the Federal Reserve are still strong, and overall financial market liquidity is tightening, which is also why Bitcoin is unable to make significant gains.
The events that are likely to impact the cryptocurrency market this year include: 1) The SEC's ruling on the motion to dismiss the case against Coinbase, as well as the progress of the SEC's cases against Binance; 2) The U.S. House of Representatives is currently considering formal legislation regarding regulating the cryptocurrency market and stablecoin issuance; 3) Risks of a bond market collapse and the Federal Reserve's interest rate hikes, among others.
Overall, if we consider the lawsuit between the SEC and Ripple, it is not expected that the SEC's cases against Coinbase and Binance will have results soon; considering the efficiency and bipartisan politics in the U.S., it is also not expected that legislation on cryptocurrency will be passed quickly; as for the Federal Reserve's interest rate policy, a shift is currently unlikely, and further tightening of liquidity cannot be ruled out, which is also a macro factor that could lead to further decline in BTC.
The major events with far-reaching implications for the cryptocurrency market in the first half of next year include: The results of BlackRock's ETF application are expected in the first quarter of next year; the Federal Reserve's interest rate cycle is also expected to turn around in the first or second quarter of next year; Ethereum's DenCun upgrade is currently expected to be completed by the end of the year, and Layer2 is expected to see a technological breakthrough in the first half of next year. Therefore, from a macro perspective, we are more optimistic about the trend market in the first half of next year, which also aligns with the cyclical pattern of the Bitcoin bull market opening after the halving.
Insights from On-Chain Data and the Halving Cycle
Finally, this article further validates our judgment from the perspective of on-chain data and the cycle. Observing the data from Galaxy:
The proportion of Bitcoin supply that has remained unchanged for over 3 years is at a historical high, exceeding 40%. Long-term holders continue to accumulate and hold for longer periods. This is also why we believe it is difficult for Bitcoin to experience a further significant decline.
Looking at the Bitcoin Entity-Adjusted LTH-NUPL indicator, on the left side of the bear market bottom in 2014-2015, the red bars appeared for 62 days; on the left side of the bear market bottom in 2022-2023, the red bars appeared for 63 days. On the right side of the bear market bottom in 2014-2015, the red bars appeared for 192 days; on the right side of the bear market bottom in 2022-23, the current red bars have appeared for 149 days. Compared to the right side of the bear market bottom in 2014-2015, the BTC bull market in 2023 may peak from the fourth week of September. (Note: The upper indicator in the chart is BTC price; the lower on-chain indicator is BTC: Entity-Adjusted LTH-NUPL, marked with red bars when the indicator is >0.25 and <0.5.)
Conclusion
Overall, Bitcoin is still in the late stage of a bear market, with $25,000 being a strong support level, but the bear market bottom is around $23,300. Due to significant selling pressure, Bitcoin is expected to undergo a period of consolidation, with $30,000 still being the bull-bear dividing line; effectively breaking through $30,000 will essentially confirm the entry into a bull market. From a macro perspective, the overall market performance is expected to be poor this year, with better market conditions expected in the first half of next year.
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