- Bitcoin price seems to be at the top end of a rally, hinting at a retracement to $40,000.
- This downswing is vital in setting the tone for the next step and could make or break BTC.
- A higher low will skew the odds in bulls’ favor and forecast a move to $50,000 or higher.
Bitcoin price is at an inflection point of its recent uptrend and is likely to reverse and establish a directional bias. If BTC sets a higher low, there is a good chance the rally will continue; else, investors can expect a steep correction.
Bitcoin price at defining moment
Bitcoin price rallied roughly 40% in under three weeks after a brutal drop to $32,837. This move set a swing high at $45,956, which grazed the weekly supply zone, extending from $45,550 to $51,860. Interestingly this area also harbors the yearly open at $46,198, making this cluster a massive barrier to breach.
Therefore, BTC bulls need a breather, which will occur in the form of a retracement to the daily demand zone, ranging from $36,398 to $38,895. Here, buyers have a chance at accumulating BTC at a discounted price.
A bounce off the aforementioned demand zone or the $39,481 support level will set a higher low and be vital in kick-starting a new run-up. This ascent needs to slice through the weekly supply’s upper limit at $51,860 and produce a daily candlestick close above it.
Such a development will indicate bulls’ willingness to move higher and set a higher high, further strengthening the bullish thesis. In this situation, Bitcoin price will be free to move higher until it hits the ceiling around the $60,000 psychological barrier.
BTC/USDT 1-day chart
While a bullish move might sound enticing, IntoTheBlock’s Global In/Out of the Money (GIOM) model indicates that the immediate resistance barrier and support levels at $39,271 and $48,557 are almost equal in strength.
The foothold at $39k harbors 4.41 million addresses holding 2.53 million BTC, and the resistance barrier at $48.5k is home to roughly 5.67 million addresses holding 2.95 million BTC at a loss. Therefore, clearing $48,557 or $52,000 is crucial in establishing a bullish regime.
BTC GIOM
Further suggesting an up move is the increase in large transactions worth $100,000 or more from 20,970 to 21,948. This 2.43% spike, albeit small, indicates that high networth investors are bullish on Bitcoin price performance.
BTC large transactions
The supply on exchange metric paints a picture of Bitcoin price from a high time frame and reveals that the long-term outlook remains highly bullish. The number of BTC held on centralized exchanges has reduced by 170,000 since January 1, signaling a decline in sell-side pressure despite the recent drop, indicating that long-term holders are optimistic on Bitcoin price.
BTC supply on exchanges
While the overall outlook for Bitcoin price remains considerably bullish, investors should not rule out the possibility of a steep correction that shatters the daily demand zone, stretching from $36,398 to $38,895.
This move is a sign that forecasts a crash to the $30,000 psychological barrier or lower to collect the sell-stop liquidity resting below the lows formed between May 2021 and July 2021. The Market Value to Realized Value (MVRV) Z-score model supports this outlook.
This on-chain metric is used to assess if an asset is overvalued or undervalued and does so by dividing the difference between the market capitalization and realized market capitalization with the standard deviation of the market capitalization.
It takes the MVRV metrics to a new level in determining historical areas of fair value, oversold or overbought. The red band indicates overbought and is typically where the bull runs top and reverse. However, the green value indicates oversold and is where long-term holders tend to accumulate.
The recent crash pushed BTC to have an MVRV Z-score of 1.5, which is well above the green band, suggesting more room for the big crypto to slide lower. Therefore, market participants should not disregard the possibility of a crash to $30,000.
BTC MVRV Z-score
A daily candlestick close below $34,752 would invalidate the bullish thesis. Such a move will skew the odds in bears’ favor and trigger a crash to the $29,100 support level or lower, allowing market makers to collect the liquidity resting below.
