Bitcoin is still consolidating around the $30k level as bulls and bears scramble for control of the area and determine the next direction.
The price formed a relatively narrow bearish flag pattern on the daily time frame after an impulsive drop below $40k. This is a continuation pattern and in case the price breaks below it, a further bearish move towards the $24,000 demand zone and even the $20,000 range (2017 all-time high) is likely.
On the other hand, a dip and an upward break from the flag would be considered a bullish signal. However, before a bullish reversal can be expected, the price still needs to break above the $32,000 level, the model’s higher trend line, and the 50-day moving average.
4 hour chart
The aforementioned bear flag pattern is more clearly visible on the 4 hour timeframe. It is currently tested with two up and three down taps.
Over the past few weeks, the price has tested the $31K resistance several times and has failed to break above it except for a false bullish breakout at the end of May. However, a push above this level would be likely as there would be significant liquidity above it.
If so, the price could test the upper border of the flag for a third time before a bearish breakout and continued decline towards the $24k demand zone. The RSI is also hovering around the 50% mark, indicating momentum is in near-equilibrium and neither bulls nor bears are dominating this time frame. A potential third touch of the top could also form a bearish divergence from the RSI, a signal that would further confirm the bearish continuation scenario.
Bitcoin MVRV Ratio
History may not repeat itself, but it rhymes. Most analytical methods in the financial markets are based on the past, as analysts rely on repetitive patterns of prices, technical and fundamental indicators to predict the future value of a particular asset.
One of the most valuable metrics for determining whether bitcoin is overvalued or undervalued is the MVRV ratio, which is calculated by dividing bitcoin’s market capitalization by its realized capitalization. Values below 1 indicate bitcoin is undervalued, while values above 3 are often associated with grossly inflated prices..
Thus, MVRV can be used to evaluate bull market tops and bear market lows. The chart shows that previous bear market bottoms occurred while the MVRV ratio was below one. These often long periods are when the smart money tends to accumulate BTC, creating enough demand to form a price bottom.
The MVRV ratio is currently around 1.3, which indicates that the price may drop further before a cyclical bottom forms.
Another interesting point is the decrease in income and losses over the past 12 years. This is due to Bitcoin’s decreasing volatility on its way to becoming “digital gold” as it attempts to transition from a highly volatile risk asset to a more stable disinflationary haven.
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Cryptocurrency charts from TradingView.
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