Market Update:

Bitcoin; Stimulus is Served

by · 5 months ago

Stimulus checks have been once again hitting the bank accounts of US citizens in the wake of the pandemic.  Expectations across markets is that retail are likely to buy up to $3bn in the coming days into equities according to research by Vanda Research. 

An investment of the previous $1,200 stimulus check is now worth $10,400 and serves as an attractive advertisement to potential investors.

This potential retail cash injection has most likely contributed to the strength seen in the market which took price across $60k for the first time over the weekend, before what was an inevitable correction after an overly exuberant market as seen by high funding rates pushing prices ahead.

Weekly Chart

The big picture for bitcoin has Bitcoin trading in the upper band of the logarithmic regression channel.  Historically this has been the range which has seen significant volatility and can be towards the acceleration phase in the bull market cycles. 

The 20 WMA which is often seen as bull market support, is catching up quickly and now sat at $34k, with weekly support and resistance (as shown by the yellow line) Being at $43k. 

Given current price action and the rate at which the 20 WMA is catching up $43k is likely to be a reasonable floor price in the short term, with there also being also of on-chain buying being seen around those prices as we have previously mentioned.

The upper boundary on the chart is at around $100k which may be indicative of a top if we accelerate in the short term. 

Fig 1: $BTC technical outlook

Daily Chart

We have been in a long trade at DT since Bitcoin reclaimed the mean line with confluence provided by the predator trading system, which shows that Bitcoin remains within a bullish trend to the upside.  The targets we have had in mind for some time remain at the 1.618 fib extension target of c.$70k, with the 2.1618 which has been the upside for much of the market moves being somewhat higher, which is seemingly a little optimistic until further price action is observed.

While bitcoin continues to close the daily above $56.5k there is a strong case for continued upside.  

Fig 2: $BTC 1 Day chart

4 Hour Chart

A closer look at price action shows that the 200 MA has been providing support through this move to the upside and is sitting at the value areas high of the previous two weeks, where price has found support, which is what should happen if bitcoin is consolidating for another attempt to push higher.

After the impulsive move up yesterday, holding the middle of the range; around $57k would be a good sign of strength.  Any down movement would need to see support maintained around the 200 MA at $53k with buyers stepping in.

Fig 3: $BTC 4 hour chart

Decentrader KPI report

Looking at the Decentrader KPI report to see how bitcoin is performing when compared to models which have previously been useful in predicting cycle tops and bottoms, we can see that as discussed above, Bitcoin is heading towards what would be expected to be close to cycle top. 

It is important to mention that the final equivocal part of the cycle in 2017 saw Bitcoin do a 4x to $20k, so the upside potential is still significant, but it is useful to take stock of where we are.

Fig 4: $BTC Market Cycle KPIs

Onchain indicators

Looking on-chain, we can see that as expected, metrics such are relative unrealised profit and loss which shows the depth of profit for market participants shows a lot of people in profit and as such entering the greed phase of the cycle. 

Also, the Puell multiple which shows how profitable miners are relatively is showing Miners are also enjoying unusual levels of profit. 

Both of these metrics are important towards the end of the cycle and do show that its time to start paying attention to the supernormal profits being made, however, we have seen these metrics run higher in the final phases of the cycle, with the extremities helping to find market tops, where participants look to realise gains.

Fig 5: $BTC On Chain KPIs

On-chain supply analysis

While it is good to know that market participants are generally accumulating and that there is stimulus injection, it is useful to keep an eye on how the miners are behaving, given that they control new supply to the market. 

The Miners position index which demonstrates the extent to which miners are selling relative to their 365 average, shows that miners are selling less than the 2.0 average.

Fig 6: $BTC MPI

In concurrence with this, miners also appear to be building up a reserve of coins in their inventory.  This was also witnessed in the final phase of the previous cycle, where there becomes a disincentive to sell. 

This reserve of $35k Bitcoins or c. $2bn will undoubtedly cause a major shock if unwound on the market and as such are worth monitoring in their own right. Should the market start to turn around, it would not be unsurprising to see an acceleration towards the door which could quickly further exasperate any larger corrections. 

A shift to miners selling would be a notable supply shift in this market and as such is something we are monitoring closely.

Fig 7: $BTC Miners reserve

So to summarise, Bitcoin continues to show strength, with $56k acting as support being a pivot point. $70k is the upside target which we have been looking towards for some weeks.

We are conscious of where we are in the cycle and are paying attention to the topping indicators but well aware that there is still room to the upside there and that the other on chain KPIs and miner indicators imply that people continue to Hodl for later in the cycle.

Major weekly support lies around $43k should there be a major correction.

Let’s see where we get to over the next week! Good luck!

filbfilb

The Decentrader Team.

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Disclaimer: Nothing within this article should be misconstrued as financial advice. The financial techniques described herein are for educational purposes only. Any financial positions you take on the market are at your own risk and own reward. If you need financial advice or further advice in general, it is recommended that you identify a relevantly qualified individual in your Jurisdiction who can advise you accordingly.