Bitcoin Bears Beware – Yet Another Key Metric Is Flashing BTC Buy Signal
bitcoin rocket. Source: Adobe
Another key metric is showing a buy signal for Bitcoin. This is according to a tweet by popular crypto analyst/influencer Mohit Sorout. According to Sorout, the so-called DCA indicator, which he calls the “mother of all BTC bullish signals,” has flashed for only the fourth time so far.
DCA stands for Dollar Cost Averaging, a technique used by cryptocurrency investors where they buy a set amount each day to secure a favorable average price. Elaborating further on the exact parameters of his indicator, Sorout explains that “the Daily DCA indicator tracks the profit/loss of buyers who hypothetically bought a certain $Bitcoin daily for the past one year (365 days).” “.
Bitcoin Market Has Returned To Profitability – A Bullish Sign?
The bullish signal from the DCA indicator is another indication that the increase in bitcoin price since the beginning of the year has brought the market back to profitability. This is important as analysts see the bitcoin market’s return to profitability after a prolonged bear market and a period where the majority of the market was in paper losses as a leading indicator of a bull run to come.
The signal from the DCA indicator chimes nicely with two widely followed indicators tracked by crypto analytics firm Glassnode. The 30-day simple moving average (SMA) of the Bitcoin Realized Profit-Loss Ratio (RPLR) indicator moved above one for the first time since last April at the beginning of the month. This means that the bitcoin market is realizing a greater share of profits (denominated in USD) than losses on the sale of BTC (or, when each BTC moves).
According to Glassnode, “this generally indicates that sellers with unrealized losses have been eliminated, and a healthy flow of demand exists to absorb profit-taking”. Therefore, this indicator is sending a bullish signal. Historically, the 30-day SMA of bitcoin RPLR moving back above 1 after a prolonged bottom (such as in November 2015 and April 2019) precipitates a huge rally in BTC price.
Similarly, the Adjusted Spent Output Profit Ratio (aSOPR), an indicator that reflects the degree of actual profit and loss for all coins running on-chain, recently surpassed 1, indicating that the market is in profit. . Looking at bitcoin’s history over the past eight years, aSOPR rising above 1 after a long time has been a great buy signal.
Elsewhere, another market profitability indicator tracked by Cryptoanalytics firm, CryptoQuant, is giving a definite buy signal for the first time since 2019.
Add DCA Indicator To The Laundry List Of Bullish Signals
The DCA indicator is the latest in a growing laundry list of popular on-chain and technical metrics to flash a bullish signal. The above two Glassnode indicators are used by the cryptocurrency firm in their popular “Bitcoin Recover from Bear” dashboard, which the crypto firm’s analysts use to gauge whether bitcoin is transitioning from a bear market to a long-term bull one. may be in process. market.
The dashboard tracks eight indicators to ascertain whether bitcoin is trading above key pricing models, whether network utilization is gaining momentum, whether market profitability is returning, and whether USD-denominated The balance of bitcoin wealth is in favor of long-term HODLers. As discussed in a recent article, seven out of eight of these indicators are currently flashing green and the last eighth may soon signal a bullish run.
Where Bitcoin is Trading Against Major Pricing Models This year saw BTC rise above its 200-day moving average and realized price, both of which sit below $20,000, indicating a double bullish turn on the technical front. Another recent technical buy signal that got bulls excited was bitcoin experiencing only its seventh “golden cross” in the last 10 years. Elsewhere, bitcoin wallet addresses holding non-zero balances recently hit a new all-time high, a sign that new investors are flooding in.
Other on-chain indicators tracked by Glassnode such as bitcoin reserve risk, as discussed in this recent article, an MVRV-Z score, which “compares market value and realized value to assess when an asset is overvalued or undervalued”, are also increasingly shouting. Signal. The latter has recently made a sustained recovery above zero after a long period that has historically marked the beginning of a bull market.
Meanwhile, bulls are also taking solace from an analysis of market cycles that the world’s largest cryptocurrency by market capitalization has historically followed. In early January, the crypto-focused Twitter account @CryptoHornHairs identified that bitcoin was trending almost exactly along the path of a four-year market cycle, which has been fully respected for eight years now.
Elsewhere, a widely followed bitcoin pricing model is sending out a similar story. According to the bitcoin stock-to-flow pricing model, the bitcoin market cycle is roughly four years, with prices typically declining somewhere near the middle of the four-year interval between “halvings” – bitcoin halvings. Happening is a four-year event where the mining reward is halved, thus slowing the rate of bitcoin inflation. Past price history suggests that the next big rally for bitcoin will come after the next halving in 2024.
Given all of the above, it should perhaps come as no surprise that bitcoin continues to defy macro headwinds, such as the recent rise in the US dollar and US bond yields driven by the recent hawkish build-up of Fed tightening expectations. . Communication from policy makers after this month’s super strong Tier One US data release.