Time for Caution
Dear subscribers,
Welcome to Bitcoin Onchain, Offchain, and Beyond.
In the last forecast (BTC price: $22.8k), I pointed out that bitcoin had a high chance of an August relief rally with lots of bullish signs, including short-term sentiment and institutional traders turning bullish, oversold key technical indicators, and a longer than normal FOMC meeting gap window. Since then, bitcoin rallied to 25k with many alt-coins generating 30%+ returns. With September now around the corner, I think it’s time for caution.
Below is a summary for market conditions on August 24th 2022 (BTC current price: $21.3k):
Mid/Long term:
BTC will continue making all-time highs, but not this year.
Not much has changed compared to prior forecasts. Liquidity issues continue and long-term holders are still selling in losses. With quantitative tightening increasing in September, the Fed still 100bps+ away from the terminal rate, and the U.S. Dollar Index at all time high (increasing opportunity costs), I think the chance of entering a cyclical bull market is slim. Furthermore, similar to how the May-July interim bottom formed last year, the initial wick low of significant drops in BTC often gets revisited, and we are yet to see the revisit of the mid June wick low of 17-18k.
Short term:
Neutral to Bearish
On-chain short-term sentiment has now switched back to the bearish trend. Bullish sentiment from institutional traders are disappearing. The risk-reward does not look good for the bulls.
Best of luck,
Vicky
P.S. If you find the analysis helpful, consider buying me a coffee at 0x646071ED932DCd0019e1EB625947bbbc6a3AF332 (ETH/BSC/Matic/Optimism).
Institutional Bulls Disappearing
After turning back to positive since late July, the Coinbase premium (78.8% of Coinbase trading volume from institutional traders in Q2 2022) has been hovering below 0 for the past week, indicating the lack of bullish sentiment among institutional bitcoin traders.
Whale addresses continued selling during the recent rally and do not have signs of accumulation yet.
Short-term Sentiment Turned Bearish
The key on-chain support at 23k is now broken and short-term traders are again selling in losses (short-term SOPR dropped below 1). This change in short-term sentiment unfortunately put more resistances and selling pressure above us when bitcoin reaches short-term traders’ break-even price levels.
Long-term Holder Still in Capitulation
Long-term SOPR remains below 1, indicating long-term traders/holders continue to sell at losses (which makes the shift in short-term sentiment a larger bearish driver). Before the long-term holders returning to a bullish sentiment, any bullish moves in bitcoin will likely be short-lived. Below is one of the charts from June, which I think act as a good reminder under current market conditions.
Despite price below the realized price being great historical long-term accumulation levels, utilizing such strategies involves long periods of unrealized loss and large drawdowns. If we look at the long-term SOPR, it remains below 1 (selling in losses / capitulating) throughout the bottom, and rises above 1 (selling in profits / returning of faith) at beginnings of bull trends. Without any signs of long-term holders returning bullish, I think there will always be more resistances above compared to supports below, and it’s too early to call the cyclical bottom.
Free On-chain/Fundamental Analysis Indicators
Onchain Whale Demand:
https://www.tradingview.com/script/9Fhu9LGQ-BTC-Transaction-On-Chain-Volume-Basic/
Active Address Momentum:
https://www.tradingview.com/script/KI8h2N33-BTC-Active-Address-Momentum-On-chain/
Active Address Trend:
https://www.tradingview.com/script/Czkfui2v-BTC-Active-Address-Trend-On-chain/
SOPR Signal:
https://www.tradingview.com/script/nzuHp5az-SOPR-Signal/
Institutional Trader(Coinbase) Premium Indicator:
https://www.tradingview.com/script/jMnKn8Er-BTC-Coinbase-Premium-Trend/
Altcoin vs. BTC Season:
https://www.tradingview.com/script/95QlU7Uk-Altcoin-vs-BTC-Season/
Free Technical Analysis Indicators
Auto MACD Divergences:
https://www.tradingview.com/script/NvtunxPO-MACD-w-Divergences/
Auto RSI Divergences:
https://www.tradingview.com/script/CuB4Dgs0-RSI-w-MAs-Divergences/
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