After a brief recovery above $20,000, Bitcoin has seen some gains over the past 24 hours. Investors who have watched its performance closely over the past few weeks may have noticed its narrow range. However, it’s probably closer to the end of the range where things are going to get more interesting.
Bitcoin has been hovering between $19,000 and $24,000 for several weeks. It has only exited the range a few times since June, implying a tight range for at least three months.
Bitcoin’s historic price action has seen periods of price trading within such a narrow range, followed by highly volatile directional price action. Now, if the same observations apply to the current range, the cryptocurrencies may also be on the same tail end.
Furthermore, an analysis of BTC’s long-term prospects shows that it has been interacting with its long-term support.
#BTC Kiss 12 years of support! pic.twitter.com/r1ohknSgmC
— MMCrypto (@MMCrypto) September 17, 2022
The previous instance of price interacting with the same support band was characterized by a long bearish wick. Therefore, repeating the same action will create a major pullback, creating a bear trap ahead of the next major rally.
The above observations are also reflected in Bitcoin’s long-term pricing model. At the time of writing, the price of BTC is below the realized price zone. This is more evidence that the cryptocurrency is nearing the bottom of an ongoing bearish cycle.
Source: Glassnode
BTC’s MVRV ratio also seems to indicate that it has regained strength. Now, that doesn’t necessarily guarantee prices are now on a recovery track. In fact, some Bitcoin indicators suggest that the bears are not over yet.
For example, the number of addresses holding more than 1,000 BTC has dropped significantly since the beginning of September.
Source: Glassnode
So far, addresses holding more than 1,000 BTC have fallen to their lowest level in 4 weeks.
Additionally, BTC’s new addresses indicator highlights that the number of new addresses has slowed. These observations point to capital outflows and slower growth. This further reinforces the short-term bearish narrative prevalent in the world’s largest cryptocurrency.
in conclusion
While long-term indicators point to BTC at the end of its current range, short-term indicators warrant caution. Many traders are bound to get too excited, which can lead to an increase in leveraged long positions. Such an outcome would also lend itself well to an unexpected major sell-off, which would lead to a liquidation of the bulls, triggering more downside.
The above scenario will pave the way for a long-term bearish wick setup ahead of the next major rally. A potential option, although not guaranteed. This situation will also provide the opportunity to buy at a bigger discount.
