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These five trends could put a stop to Bitcoin’s 100% rally from $3,700 bottom

Market Analysis

Crytocurrency / Market Analysis 59 Views

Although traders are undoubtedly still scarred by Bitcoin’s 50 percent single-day crash in March, the cryptocurrency has mounted an impressive comeback ever since.

In fact, just the other day, it reached $7,470 — around 100 percent higher than the bottom established during the “Black Thursday” crash.

Unfortunately, some have begun to suggest that the crypto market’s luck has ran out.

Technicals & on-chain metrics suggest Bitcoin is about to reverse

Crypto trader Nunya Bizniz recently observed a confluence of four technical analysis-based trends that suggest Bitcoin’s rally is coming to an end. They are as follows:

  • Horizontal resistance: Bitcoin has encountered a horizontal resistance level at ~$7,300. This is where BTC bottomed in October prior to the infamous China pump. Historical supports turn into resistances, traders say, hence why Bitcoin’s rally is on hiatus.
  • Trendline: Per Bizniz, Bitcoin recently encountered a downtrend in line with the horizontal resistance. The downtrend has yet to be broken, which could drag the crypto market lower.
  • 50-day moving average: To add to the above, Bitcoin has also failed to surmount the 50-day simple moving average of its price.
  • Tom Demark Sequential “9” candle: The Tom Demark Sequential, a time-based indicator, just printed a “9” candle, which has historically marked reversals in the BTC market. A 9 candle was seen on the day BTC hit and reversed from $10,500 in February, and a 9 marked the $6,400 bottom in December 2019.

Furthermore, ByteTree — an on-chain metrics provider — suggests that Bitcoin is currently overvalued per their metrics, with BTC trading at a slight but a non-negligible 4.7% premium to the fair value of just under $7,000.

This fair value is calculated by weighing Bitcoin’s Network Value-to-Transactions ratio, the transaction value, and the supply of the BTC network, according to a post from the site.

All these factors in tandem suggest that at the very minimum, the booming cryptocurrency market will see a short-term correction.

Demand for crypto is booming

Although there are these overarching trends, demand for Bitcoin has been booming, which could negate any technical and on-chain metrics if buy-side pressure keeps up.

Per previous reports from CryptoSlate, crypto-asset manager Bitwise has begun to see strong retail inflows into its products. Similarly, Michael Sonnenshein of Grayscale Investments, the firm behind the GBTC Trust, saw a “record-breaking asset raise this quarter.”

Furthermore, as I recently observed, multiple data points, from order book data and volume to Alexa rankings and Google Trends, are exhibiting signs that consumer demand in cryptocurrency is increasing at a rapid clip.

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