A continued strengthening of the dollar as the world economy slows, worsens inflation, and therefore hurts foreign entities that they have adapted their economy to this currency and that they need “solid business transactions”.
In this sense, Stronger US Dollar Index Exposes Bitcoin (BTC) Price Weakness and/or its inverse correlation, which is an indicator of great relevance that must be taken into account, since this implies that the optics for all the prices of digital assets, including Bitcoin, continue in an unclear panorama. .
Bitfinex’s weekly on-chain analysis delves into a fair valuation metric for the Bitcoin cryptocurrency, where it can be seen that the “btc shrimp” (wallets sized 0.1-2 BTC) are aggressively buying.
Therefore, BTC price since April 5, had shown a move below a descending resistance line, with the last price rejected on June 6 taking it to a low of $17,000 on June 18. Since then, its value has been growing, breaking the resistance on July 18 of this year.
On the other hand, the Relative Strength Index (RSI) has moved above 50, this means that the RSI supports the bullish continuation and is still above the rising line.
Bitcoin MVRV-Z
The daily issue points out, how for the last four bear markets the MVRV-Z score (usually used to assess the fair value of a crypto asset) has correctly signaled the bottom.
However, they do highlight the fact that like another metric, the MVRV-Z Score, is not without its faults. This metric cannot accurately predict the number of days the digital asset should remain in the undervalued zone before correcting.
“Investors use the “fair value” of an asset to assess whether the current price of an asset is overvalued or undervalued (…) In 2020, it only remained undervalued for 20 days and immediately began a bull run. This was greatly influenced by the economic situation where people panicked during the pandemic which caused the Bitcoin price to drop sharply and quickly recovered as soon as the government started printing money in the form of stimulus checks. ”manifest from the exchange platform, Bitfinex.
Analysts consider that the situation is no different now that Bitcoin is driven by global economic behavior.. On the contrary, they believe that these “levels are buying areas”, especially for those who consider holding it in the future.
Despite the current market situation, since 2021, BTC shrimp, or small-sized BTC addresses, are growing in number, so much so, that the accelerated growth they have had since mid-June of this year has been reflected. The analysis also reflects the 90-day supply change in wallets with 0.1 to 2 BTC.
“There is a large sustained rally for shrimp that have surpassed the 2017 bull market peak levels. This is interesting because with the current market situation and after falling over 70% from its November 2021 peak, shrimp They are behaving as if they were in the extreme greed phase of the 2017 bull market.” they explain.
miners agreement
In this context, the question arises: who is buying BTC? Who is selling it to them? Experts deduce that despite fear and global economic uncertainty, shrimp are buying BTC in this “undervalued area with a lot of conviction”.
Also, they consider that this accelerated accumulation of the cryptoactive by the shrimp, after its drop from its all-time high, it has to do with the fact that miners are the ones behind the BTC sale.
For what they consider important, observe their behavior, since it is difficult for whales to sacrifice their holdings of this cryptoactive “since smart money is not sold during extreme fear in the market.”
They also explain that the difficulty ribbon is a chart of simple moving averages expressing BTC mining. Compression of it adds a standard deviation to help determine market bottoms.
They detail that this tape reflects the impact of the sales pressure of the miners on the price of the digital asset. Now, when the rate of increase in the difficulty of the network is reduced, it means that many miners are “abandoning production” leaving only those miners considered the strongest in the game, these being the most efficient and the least selling they do, which triggers a bullish action.
“Historical data shows that values between 0.01 and 0.02 signal bottoms. Currently, the value is at 0.0162, interestingly lower than the last three cycle lows. In 2015 we had a market bottom of 0.024, the 2018 bottom was 0.019, while the recent 2020 bear market bottom was worth 0.020. Based on previous bear markets, the compression of the difficulty ribbon suggests that Bitcoin is close to bottoming.” they explain.
What are long-term holders doing?
Historically, long-term holders have been observed to be those who profit in a bull market and accumulate during difficult market conditions.. 80% of the circulating supply of Bitcoin is in the hands of long-term holders (LTH), these are users who have held BTC for at least six months.
“We have explored the metrics used to determine the maximum and minimum cycles, but Glassnode’s Realized Cap HODL waves show what sizes of entities are holding bitcoins in the minimum cycles and the amount”manifest from Bitfinex
This action is supported by the previous bottom of the bear market, because every time the market bottoms out in the cycle, long-term holders have “limit buy orders” to provide the asset with strong support.
“The cost of producing Bitcoin is now $13,000, down from $20,000 in early June, as miners race to increase mining efficiency to increase profitability in the bear market. If Bitcoin continues to have bullish momentum, there will be much less selling pressure from miners, further supporting Bitcoin’s bullish thesis.
The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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