Monday, August 8

BTC Eyes Critical October Monthly Close Amid Short-term Pullback (Bitcoin Price Analysis)

October has so far been a solid month for BTC, currently higher by 40% for the month, after the September shake out.

The overall trend in fundamentals and on-chain remain firmly bullish, as long-term holders and miners continue to show no signs of aggressive distribution. The conditions continue to look very similar to BTC’s situation in November 2020, right before a new all-time high was achieved.

However, we must remain cautious in the near term as spot inflows have been slowly trending higher, and the estimated leverage ratio is still elevated at .19.

The Technicals

TL;DR – if BTC struggles to hold the 21-day MA, 21 day EMA, and $60K over the short term, it could trigger further downside to the support zone between $58.3k to $53k.

BTC/USD, Oct-31
  • The Bitcoin price remains in a near-term pullback phase after a strong rally of four weeks, with increasing open interest, funding rates, and estimated leverage ratio
  • BTC managed to close above the 21-day MA, 21-day EMA and $60k, which is a near-term positive signal, but the leverage ratio is still elevated, suggesting there is still the risk of a shakeout.
  • In that case, the price zone between $58.3k to $53k is likely to serve as a strong technical and onchain support level to watch.
  • BTC recently pushed above a near term downtrend line, but remains below $63.7K, a level to help form a higher-high
  • Important to note, in November 2020, the estimated leverage ratio was at .20, which led to a 16% pullback, then a breakout to new all-time highs, sending BTC from $20k to $40k very quickly.
  • Recently, BTC made new all-time highs, but with an elevated leverage ratio, which led to the current shakeout.
  • Given the firmly bullish trend in fundamentals and onchain, it is likely for BTC to find a local bottom between $60k to $53k, then retest previous all time highs at $64.8k, leading to a massive breakout higher.
  • In case the bitcoin price closes below $53k, this will be a bearish signal, triggering further downside risk to $50k to $45.2k. This is a scenario the bulls need to avoid to protect the current breakout attempt above $64.8k.
  • Critical monthly close is coming up (Sunday midnight UTC): We need to see a monthly candle close above $58.8k to make a new monthly closing high, further strengthening the long-term technicals.

    BTC/USD monthly chart.

The Onchain

Onchain metrics continue to show a very bullish overall trend for Bitcoin:

  • Spot exchange and all exchange reserves continue to remain at multi-year lows. Even though spot exchange reserves have increased as younger coins, likely traders have realized in profit.
  • When looking at UTXO Age bands, older coins in aggregate continue to net accumulate, while younger coins have been aggressively taking profits.
  • Miners continue to hold, showing no signs of distribution: Miner reserves are currently around 1.857m BTC
  • Metrics such as SOPR and CDD continue to remain flat, indicating no aggressive profit-taking from older coins.

    BTC On-chain analysis, Oct-31

  • Mean Coin Age continues to make new all-time highs, despite the near-term pullback, indicating older coins have not been selling this pullback.
  • BTC already made a new record high, and LTHs and Miners have not started a trend of distribution. This indicates there is a significant upside ahead for BTC
  • Google search trends for BTC remain below cycle peaks, with active addresses nowhere close to peaks.
  • This all suggests there is a significant upside ahead for BTC.

    BTC On-chain analysis, Oct-31

In Conclusion

  • large rallies with increasing leverage need healthy shakeouts to flush out leverage and help build structure, making the bull market rally more sustainable.
  • We can expect a bullish continuation leading to new all-time highs after the pullback phase completes
  • The risk on trade continues with stocks making new all-time highs, as investors have been rotating out of the dollar and bonds back into risk assets.
  • Bulls need to protect $58.3k to $53k in case of further shakeouts. Onchain and technicals suggest this support zone is likely to hold, with bullish continuation to new all-time highs in November.

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Cryptocurrency charts by TradingView.