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27 November 2021
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Bitcoin

Analysis: BTC awakens as on-chain indicators turn bullish

  • The Bitcoin price is again stuck in a narrow price range between $9,400 and $9,500.
  • Analysts warn that Bitcoin can again fall to $8,000 or below.

On July 23, Bitcoin broke out of the tight range it had been trapped in, climbing to $9,400 before settling in the $9,480s, where it has been trading ever since. The breakout, while hardly pant-ripping by Bitcoin’s standards, spurred hopes that it was the preface to a larger move upwards. While Bitcoin bulls have yet to build on that foundation, on-chain indicators suggest the stage is set for greater upwards movement in the weeks ahead.

On-Chain analysis paints a positive picture for Bitcoin

Bitcoin is at a key inflection point. After repeated rejections of the symbolic $10K barrier, convention holds that its next move should be downwards to sub-$9K territory. However, this must be countered with on-chain data that shows the number of active addresses is at its highest since BTC’s 2017 bull run. Analyzing the price of Bitcoin is a dark art that calls for factoring in TA, FA, and even SA – sentiment analysis. Improvements in the fiat infrastructure connecting the cryptoconomy, enhanced custodial solutions, and growing institutional demand for Bitcoin, as evidenced by the growth of Grayscale’s Investment Trust, all paint a positive picture. But this must be countered by BTC’s failure to meaningfully move in months.

Bitcoin has been meandering in the low $9,000s since mid-May. Image c/o CoinCodex.

Bitcoin is up 27% for the year to date, but has struggled to surpass $9,500. Meanwhile, other crypto assets have been recording triple-digit gains, particularly defi governance and oracle tokens such as LINK, COMP, and MTA.

“I think sooner or later [BTC is] going to break out,” said Binance CEO CZ in an interview with Bloomberg Daybreak. “But right now Bitcoin has been really stable— People have been calling it a ‘stablecoin’ now.”

Bitcoin’s correlation with the stock market, a trend that has been in full force since March, prompted CZ to acknowledge that “The stock market is probably a thousand times bigger than the crypto market. When that goes down, and a lot of people are losing a lot of money, many of those people who have crypto investments will want to convert those investments into cash.”

Active BTC addresses creep higher

One positive for Bitcoin investors has been the increase in the number of active BTC addresses, which have reached a seven-day average of over 305,000. Meanwhile, the total amount of BTC recorded on Ethereum has surged to $149 million as assets like WBTC and SBTC see high demand from defi users. The growth in active Bitcoin addresses, which now sits at levels last seen in December 2017 when BTC was at its all-time high, has fueled belief that the cryptocurrency is on the verge of another breakout.

Technical analysts also believe the stage is set for a major move, with one trader pointing out that bollinger band width for Bitcoin’s chart is approaching two-year lows, which suggests that a major move is imminent. Bitcoin has failed to rocket in the aftermath of its May halving, as many commenters believed it would. It now stands at a crossroads, with five-figure territory pointing one way and the $8,000s another. Whichever way Bitcoin turns, traders shouldn’t have to wait long to find out.

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