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After being confined within the $31,500 to $29,500 range for over a month, Bitcoin has fallen below this price bracket due to a lack of encouraging factors. Nevertheless, higher timeframe on-chain indicators continue to suggest a bullish market.
Indeed, the most recent edition of Bitfinex Alpha indicated that we might still be in the initial phase of a bull market.
Beginning of a New Bull Market
The report states that despite the recent decline, Bitcoin’s current market price remains above its realized price of $20,361. This essentially implies that market participants are in profit, and they are likely to maintain their positions, as, on average, long-term holders have been profitable since the start of the year, as explained by Bitfinex.
When Bitcoin regains its position above the Realized Price after an extended period below it, this typically indicates the beginning of a new bull market. The report noted that this relationship between the price recovery of the leading cryptocurrency and the start of a bull market is a “notable trend” in its historical performance.
The emergence of new Bitcoin wallets has been noted as the 30-Day Simple Moving Average (SMA) exceeded its 365-Day SMA in November. Such an increase in wallet creation generally aligns with or precedes the onset of bull markets, suggesting a potential positive price movement for the cryptocurrency in the near future.
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The Bitcoin market generating more profits than losses further signifies a favorable market environment for sellers. This serves as another indicator reinforcing the bullish perspective.
Derivatives Market Continues to Lead
The recent price fluctuations have led to a slight rise in volatility; however, there has been no substantial change in the order flow and options activity from buyers and sellers.
The Bitfinex Alpha report noted that not only did the price break down from the established trading range, but an attempt to re-enter it was also turned away on July 26th. It further mentioned that technical traders might interpret this as a bearish signal. However, there is more to consider.
The long-term fundamentals remain stable, as the behavior of the derivatives market indicated minimal changes. Following Bitcoin’s immediate drop from the range, open interest increased by 7.5% to reach new local highs. Conversely, funding remained positive, favoring short positions.
The non-violent nature of the downward range break resulted in significantly fewer liquidations compared to typical liquidation cascades observed with Bitcoin or previous breaches of range extremes within this range.
Moreover, a negative Cumulative Volume Delta (CVD) during the on-ramp suggested increased activity from sellers amid low demand. This trend indicated low volatility in Bitcoin’s price, where buyer/seller sentiment has remained unchanged while the price continues to be predominantly influenced by the derivatives market.
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