Bitcoin’s (BTC) market cap is currently $ 200 billion with a trading volume of $ 3.4 billion in the past 24 hours. Spot market prices rose 20.91% last week to trade at USD 11,000. So far, Bitcoin is in third place in annual returns with + 46%, just below Bitcoin Satoshi Vision (BSV) with + 107% and Ethereum (ETH) with + 140%. This is the case even with a significant rise in BTC prices It is still trading at 45.99% below its all-time high of late 2017.
From Black Thursday, when prices hit annual lows, until mid-April Bitcoin’s historical volatility has seen the largest increase since it was captured. In early May, when the explosiveness of prices started to lower volatility, These periods have dropped to points in cumulative periods such as 2016 and 2018 and are usually characterized by minimal price fluctuations within certain areas.
However, a few days ago this pattern began to change, leading to higher volatility volatility that is quite bullish in the short term. If this optimism continues in the markets (and we are not limited to crypto), volatility is expected to continue to increase, which will lead to more violent price movements.
The same expectations for long-term growth revealed two basic indicators for forecasting higher prices in the coming months. The first reason is an increase in the volume of Bitcoin futures, which reached monthly highs. In the past two years, a large part of the BTC volume has been transferred to futures, which is mainly due to better trading conditions for operators and high leverage margins. An increase in trading volume in line with prices could be the first sign of a broader bull market.
The second reason is the strong growth of Open Interest (OI) in mainly institutional markets (CME and Bakkt). For the newer ones in the house, open interest is the number of contracts or the amount that corresponds to them and represents open operations within a certain market. For July 20, the OI in the CME was approximately $ 372 million, today it is $ 481 million, an increase of 30%. Such an increase could be due to institutional operators opening more contracts in anticipation of high volatility in the coming weeks.
On the network side, the number of on-chain transactions per day (line, graphic below) fell sharply at the end of March, but have increased again. Average transaction values in USD (fill, graph below) They were between $ 5,000 and $ 10,000 last year. Despite strong fluctuations in transactions, transaction fees and outstanding transactions have remained relatively low. This suggests that the latest Bitcoin scalability solutions like Segwit better digest a significant amount of network stress.
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While the chain’s metrics don’t suggest anything out of the ordinary, Bitcoin’s balances on major exchanges could make an interesting difference in how we see BTC in the medium term. After the price drop in mid-March, Bitcoin balances have gradually decreased. These are the last 3 months in which these values have fallen faster.
A decline in bitcoin supply between exchanges shows that operators may accumulate more assets by selling them at better prices in the future, as it is expected that big purchases of bitcoin will not usually stay on the exchanges for long they are transferred to cold wallets or custody accounts. It is quite common for stock market balance sheets to grow with exponentially rising prices when operators start depositing their bitcoins to sell their positions.
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Other metrics that encouraged our bullish theory were the Coin Days Destroyed (CDD), which is calculated by multiplying the number of coins in a transaction by the number of days that have passed since the coins were last issued. In short, the metric measures the transaction volume based on the weight of the most recently moved coins. As can be seen in the graphic, The peaks in CDDs were associated with strong selling periods in Bitcoin prices in both December 2018 and September 2019. The prices below resulted in a high proportion of coins destroyed. Throughout 2020 CDDs have not manifested on a large scale, which leads us to believe that BTC holders are not interested in burning (moving) their assets for sale.
With the help of the technical analysis, we were able to create a roadmap for future market movements. As the recovery continues to show after the significant decline on March 12, The technical indicators have become more bullish.
Exponential moving averages of 50 days (EMA) and 200 days are usually a litmus test to determine the trend of an asset. In the case of Bitcoin, On March 14, the 200-day EMA exceeded the 50-EMA, marking the end of the upward trend and the beginning of a downward trend. This is called the cross of death. On May 20, the 50-day EMA exceeded the 200-EMA, making room for the gold cross and the start of a new upward trend. During a BTC price cycle, both the 200 and 50 EMA have served as important supports and resistances in the past, so any short-term retreat would find a base at $ 9,373 (EMA 50) and $ 8,788 (EMA 200).
In the case of the relative strength index (RSI), the values indicate extremely overbought prices that reach level 81If we compare the current state of the RSI in perspective with previous levels, we will find that the price has always been at the top of a movement. To get into the context Since October 2017, the RSI has been only nine times above the 80 level. Once this point is reached, prices are usually contracted to compensate for the lack of demand. This was achieved without exception.
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There are four key metrics for the Ichimoku cloud. the current price in relation to the cloud, the color of the cloud (gray for bearish, blue for bullish), the Tenkan cross (green line) and Kijun (blue line) of the delay interval (pink line). The best entry occurs whenever most signals change from bearish to bullish or vice versa.
On the daily chart, the cloud metrics with the default settings are optimistic: The price is above the cloud, the cloud is bullish, the TC cross is bullish and the delay interval is above the cloud and the price. When the price came out of the cloud on July 22, Ichimoku signals showed Bitcoin’s bullish intentions.
When the $ 9,400 range was broken, prices began to move with tremendous momentum. This is evident from the almost 90 degree incline of the Tenkan and Kijun. Every good opportunity to enter the market is accompanied by an approximation between price and telecommunication lines. That’s around USD 10,000 and USD 10,200.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every step of investment and trading involves risks. You have to do your own research when making a decision.