Bitcoin’s Fragile Position and Potential Sharp Decline
Bitcoin finds itself in a precarious position, with its price just above a vulnerable support level at around $25,000. Losing this support could result in a significant decline in price.
However, despite this uncertainty, the uptrend that has been intact since the beginning of 2023 remains unbroken. Holding this level of support may trigger a bounce and potentially lead to a breakout above the resistance at $30,000.
Both scenarios are plausible based on on-chain analysis. The realized price and historically low volatility indicate that a major movement in the cryptocurrency market is imminent, with the possibility of Bitcoin retesting the $20,000 level.
Understanding Realized Price in Bitcoin Cycles
The realized price of Bitcoin is an indicator that calculates the realized market capitalization divided by the current supply. It assigns different values to different parts of the supply based on the price at which each UTXO (Unspent Transaction Output) was last moved.
Examining the long-term chart of the realized price in comparison to daily BTC price action reveals cyclical patterns. In each cycle, the market capitulation period began when the BTC price fell below the realized price, marking the macro bottom of the bear market.
Conversely, when the BTC price broke above the realized price, it signaled the start of a long-term bull market. The only exception was the COVID-19 crash in March 2020, where BTC experienced a sharp decline but later made a bullish retest of the realized price, presenting a lucrative buying opportunity.
Applying these observations to the current cycle, Bitcoin dropped below the realized price in June 2022 and eventually bounced back, indicating similarities to past cycles.
Possible Retest of $20,000 for BTC
Currently, Bitcoin’s price is hovering around a critical support level at $25,000. Technical analysis suggests that if this support is lost, a drop to the next level at $23,500 is possible. However, there is also a possibility of BTC dipping even lower and retesting the $20,000 level.
The realized price chart supports this possibility, as the indicator is currently around the $20,000 mark. If history repeats itself, a retest of this level could present an excellent buying opportunity.
Notably, analysts such as @WClementeIII and @el_crypto_prof have also highlighted the potential for a further decline in BTC’s price. However, they view such a retest as a favorable moment for entering the market.
Historically Low Volatility and an Impending Big Move
Another prominent analyst, @el_crypto_prof, recently pointed out Bitcoin’s extremely low volatility on high time frames. The Bollinger Band Width Percentile indicator for the 2-week chart of BTC indicates the tightest range in Bitcoin’s history.
After a period of such compression, it is expected that volatility will increase with a sharp move. However, the direction of this move remains uncertain, as the BBWP and the relative strength index (RSI) show no clear trend.
In the bearish scenario, a sharp move could lead to a test of the realized price level near $20,000, which would be an opportune moment to enter the market. Conversely, in the bullish scenario, increased volatility could coincide with the resumption of the uptrend, with the $30,000 threshold serving as a crucial resistance level.
Hot Take: Bitcoin’s Future Hangs in the Balance
The current state of Bitcoin’s price and market trends presents a critical juncture. The potential for a sharp decline or a significant upward movement looms, with factors such as realized price, volatility, and historical cycles influencing the outcome. As an investor, it is essential to closely monitor these indicators and seize opportunities that arise, whether through buying during a dip or capitalizing on a bullish rally. The future of Bitcoin remains uncertain, but the potential rewards for informed decision-making can be substantial.
By
By
By
By
By
By