With the recent price increases, the hope returned that the bottom would be reached. Can this actually be confirmed? Not all Bitcoin enthusiasts share this opinion.
If you look through the virtual forest of leaves, sometimes you get the impression of a very simply knitted world. Those who believe in Bitcoin, of course, are on the side of the cops. The ground has already passed and we all can look forward to the upcoming bull market.
From this assumption, some conclude that every bear is a Bitcoin critic. Of course, one can agree with that: anyone who thinks that Bitcoin is a rat poison that would fall back to zero certainly takes a bearish view on the Bitcoin price.
But how is the world knitted in the short to medium term? Is every Bitcoin fan convinced that the bottom has been reached?
A good week ago there was a discussion on this topic between different Bitcoin enthusiasts. Tone Vays discussed with Leah Walds and Tyler Jenks of Lucid Investment Strategies, Venzen Khaosan of Cryptocurrents, Murad Mahmudov, Willy Woo, David Puell and finally Tuur Demester, the latter of Adamant Capital. Those who have plenty of time are the whole
Discussion to the heart:
Ring free for the Bitcoin Bulls
The bullish position is closest to the average reader. Be it Hopium, be it the justifiable justifications for reaching the land – there are undoubtedly good reasons for a bullish position.
Four of the debaters represented this position. It is striking that the main arguments were based on charting or on-chain analysis. Only Tuur Demester addressed some fundamental reasons for passing the soil.
With averages to new heights
A well-known argument is advocated by, among others, Murad Mahmudov: The Bitcoin price could bounce off an important moving average and rise above a second equally known one:
In the above weekly chart, in addition to the Bitcoin course, the moving averages are entered for approximately 50 days (orange, specifically 7 weeks), 200 days (purple, specifically 30 weeks) and 200 weeks (blue). Three things lead to a bullish forecast:
- As in the bear market of 2015, the bitcoin price was able to rebound at the mean of the last 200 weeks.
- In addition, Bitcoin has recently risen above the moving average of the last 200 days.
- Finally, a golden cross was formed: the moving average over the past 50 days has risen above the last 200 days.
These arguments can be supplemented: on the one hand, representatives of the bull hypothesis can point to the frequently presented moving average of the last 20 weeks.
Beyond the moving averages, one can point to further positive developments: the MACD is rising, as is the RSI no longer below 50. Finally, the Aroon-Up indicator is back high for the first time since the end of 2017. So the indicators speak a bullish language.
On a daily chart level, too, one can argue that the soil is behind us. Dave Puell based his bullish assessment on various metrics. Two of them were the RSI and the breadth of the Bollinger Band. The latter is a measure of the price fluctuations and thus of the volatility. For him, the annual minimum of 2018 is the floor based on the bullish divergence between RSI and price:
While the Bitcoin price headed for a new minimum, the RSI did not fall to a new minimum. In addition, in the course of the sale of late November shot up the width of the Bollinger band in the air. Both are interpreted by Dave Puell as reaching the ground.
On-chain metrics Bitcoins vote bullish
Another point of view is that of Willy Woo: If we look at the on-chain activity, cycles can be recognized here as well. Particularly illustrative in this context is the transaction volume:
Within a bull market, this rises and falls to a minimum in the bear market. As can be seen from the above figure, this on-chain volume has been rising again since the end of 2018. According to this hypothesis, the soil is also reached
Unrealized gains signal hope
A metric already presented in March is the unrealized gains. Tuur Demester of Adamant Capital looked at the difference between market and real capitalization. In addition, he divided the size by the market capitalization, which resulted in the so-called Unrealized P-L ratio. About this size can observe the cyclical behavior of Bitcoin investors:
The sign of this ratio provides an answer to the question of the soil: if it is positive, the soil has been reached.
For Tuur Demester, this ratio is one of the reasons for his bullish forecast, the ratio could rise with the rise in price of April 2 in the positive area.
Attention: bears are approaching
After so much bullish assessments that are already seeing the ground, let’s look at the antithesis. Because not everyone is of this opinion. You do not just have to look in the direction of Nouriel Rubini or Warren Buffet, even among analysts who are very open to Bitcoin, there are skeptics who see the near future Bitcoins rather bearish. The analysis of bearish assessments of Bitcoin sympathizers is helpful, as it helps them not only to follow Hopium with enthusiasm and take a long-term perspective. Therefore, let’s look at what speaks against reaching the ground.
The market is not mature
An argument is completely detached from charts. The hopes for an institutional adaptation of Bitcoin, as reflected in the report by Tuur Demester and Adamant Capital, can not be shared by Leah Walds and Tyler Jenks. So far, no real adaptation to large institutional investors should have happened. Fidelity, Goldman Sachs, J.P. Morgan Chase adorn themselves in their view with the subject crypto, nothing more. A big problem in her opinion is the incredible amount of Altcoins.
With the plethora of shitcoins remain the crypto market in the county league. In addition, the question arises, why institutional investors even come into the crypto market? The regulatory implications are still unclear. Also, the drama of tether, hacked exchanges, or the controversy surrounding QuadrigaCX show how immature the market is still. Money can also be earned on the classic markets. For a store of value, they can draw on bonds and the like, while traders can also trade in traditional markets.
As long as the market is still so immature and consequently an investment uncertain for investors, Leah Walds and Tyler Jenks remain bearish regarding the narrative of institutional adaptation. For this necessary maturity, the market must fall lower, so it comes to a shakeout.
Are averages really so clear?
Earlier, the moving averages were addressed. Yes, the bitcoin price has risen above the moving averages of the last 200 days and the last 20 weeks. Yes, there was a Golden Cross between the MA50 and the MA200 on the daily chart. But the latter continues to fall. Not a few analysts, including Tyler Jenks, see it as another bearish sentiment.
Really understand this assessment is not. That an average of the last 200 days in the past market situation is not rising is, with all due respect, a truism. The golden cross between the MA200 and the MA50 in the daily chart also shows that a certain sustainability already exists.
Nevertheless, a moving average is just a hint. This is a bit similar to what we always said about the MA20 in the weekly chart: it is not enough for the price to rise above it for a short time. Necessary is a longer-term rest of the course above this important moving average.
Bitcoin at the end of a hyperwave?
A forecast is especially bearish. Tyler Jenks analyzes markets based on major trend moves he calls Hyperwaves. Hyperwaves are large blisters that can be observed in various asset classes. For Bitcoin, this Hyperwave looks like this:
There are seven lines drawn that represent seven phases within such a wave. It starts with a long sideways movement, which can be measured at the previous maximum (1). After a course gains more and more momentum (2-4), the pursuit of higher prices abruptly breaks down (5). The market is trying a little to keep the upward movement (6), but this does not change the general decay of the bubble (7).
With the dramatic fall of November 2018, the Bitcoin course underwent an important Phase 2 defined support. This slump is reason enough for Tyler – despite the current upward movement – to expect a further price drop to level 1. Say, for him, the true ground is $ 1,000.
As far as the bullish and bearish assessments. Cynics might say that it either goes up or down. So far, so uninteresting.
On closer inspection, it is striking that, perhaps unconsciously, the different parties define ground differently. Tyler Jenks says that exceeding the moving average of the past 200 days is not enough to detect a bottom, while Murad Mahmudov sees the very first sign of it. What Tyler only points out is that exceeding the MA200 – just like the MA20 we often look at in the weekly chart – can only be temporary. Only when these moving averages see a trend reversal and rise again, one can speak of a sustainable upward price development.
Something similar can be said for the discussion of fundamental values: Leah Walds has undoubtedly enough that from J. P. Morgan Chase and other much marketing interlocutors determine the market. The talk about Bakkt has not led to a Bakkt already. SEC “responses” to ETF applications are slowly becoming crypto-scene running gags, and similar things can be said about shallow announcements from the financial sector. And yet it is interesting that bitcoin, blockchain and cryptocurrency meanwhile have to serve for frequently used marketing phrases. It shows that the institutional investors take the crypto currencies at least seriously. Such interest can be a start. The views complement each other, what unites everyone in this discussion is that in the long run they are very bullish on Bitcoin.
Assessment based on DVAV
Regarding a recently introduced metric, we unfortunately have to finish the article a bit bearish. In March, we not only introduced delta capitalization, but also developed a ratio based on it. The relationship between delta capitalization and average capitalization was particularly interesting. It could be seen that reaching the ground coincided with a fall in the DVAV ratio below 2. Currently, however, this is still above the two:
Looking at the DVAV is a bit of a counter-argument to the on-chain arguments of Willy Woo and Dave Puell. The delta capitalization includes the so-called real capitalization. Unlike the market capitalization, this multiplies the bitcoin price, not the entire supply, but the sum of all coins moving at the time. The earliest bitcoin is considered worth $ 0, while a token held since January 2018 would add $ 10,000 to the real capitalization. Thus, indirectly, on-chain dynamics are also considered.
According to the DVAV ratio, we are in a similar situation as at the end of 2014. At that time there was still a large shareout. The price increases between the 5th of October and the 14th of November 2014 turned out to be a Bull Trap and the price dropped dramatically again.
As far as a warning. But investors should think long term about Bitcoin. In that sense, investors should not be too much interested in looking for land, but, as we have repeatedly emphasized, keep an eye on Bitcoin’s technical foundations and see that a lot is still going on here. Bitcoin still has unbelievably disruptive potential and is more likely to be the needle than the bursting bubble to stay with the article image.
Whichever of these different predictions is correct, will show. Until the bottom of the land and up to new heights, long-term investors can cheaply increase their bitcoin position. Dollar cost averaging lends itself to this. And traders can already profit from movements in the Bitcoin price in one direction or another.