The analytical firm Glassnode evaluated in its latest report on the bitcoin (BTC) market the underlying support that contributed to establishing the recent lows in its price. At the time of publication of this article, the cryptocurrency is in its third week of rebound.
The study refers to the uptrend that started on January 24, which led the bitcoin price to break the psychological barrier of USD 40,000 in recent days and remain above that level.
On the other hand, the report examines whether, in response to the recent bullish wave, a “short squeeze” and a change in the buying habits of short-term holders has occurred.
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«With numerous ‘macro’ and market winds againstthe question is if this is THE background [del precio de bitcoin]or if it is simply a local bottom within a longer bearish period»poses Glassnode.
In 2021, a level slightly below USD 30,000 was established as support for the bitcoin price on July 21 of that year. Subsequently, in the descending corridor that started after the all-time high on Nov. 10, the support breached was close to $32,800, as seen in the chart below.
Support Strip Strength
The study highlights that during 2021 and 2022 the price range between USD 30,000 and USD 40,000 has represented strong support for bullish positions. In 2021, this range was defended after the 50% May-July correction, provided support in the September correction, and has been a source of support again in January-February this year.
In the chart above, the URPD metric shows the distribution of effective prices for the current set of bitcoin unspent outflows (UTXO). You can see from this graph that 2,351 million BTC (12.41% of the supply) was last traded between $36,200 and $41,200. The previous week’s closing price was above $41,000, as shown by the black bar on the chart above.
Even with the redistribution of these coins to lower realized values, the market remains strong, with over 25% of the outstanding supply last traded at higher prices.
Glassnode, a blockchain analytics company.
The Role of Bitcoin Short Liquidation
With the rebound of the last few days in the price of bitcoin, liquidations of short positions begin to occur again, which reverses the dominance of long liquidations that had been registered since the end of last December.
The study highlights that the magnitude of the short liquidations is moderate, as can be seen in the graph, compared to those that occurred with the upward rallies of July and October of last year. “The magnitude of this metric remains unattractive, indicating that it is unlikely that the price is receiving a significant boost from short liquidation,” the report said.
bullish bitcoin price divergence
Glassnode highlights that a “dramatic bullish divergence” is underway between the Effective Market Gradient indicator (MRG) and the downward trend that the price of bitcoin had been registering since last November 10. This metric measures the degree of momentum or momentum in the market price relative to capital flows.
In the chart above, within the fluctuations of MRG (in blue), the lows are rising, denoting positive momentum, while the price had been falling for the same period. The fact that the MRG has turned positive, indicates that a new price impulse is about to take effect.
In the latest Bitcoin newsletter Fear and Greed Indexcommented this Wednesday, January 9, by CriptoNoticias, several antecedents of the recovery of the bitcoin market of the last two weeks are examined, with a view to establishing if there has been a reversal of the downward trend that has prevailed since mid-November.