#forecast 053 : Transitions


Dear subscribers,

Welcome to The Bitcoin Forecast #53.

This a new update to cover some significant changes seen on-chain in the last 48 hours.

Top level summary for 14th Mar 2022 (current price $38.9k):

Structural summary: Demand has returned on-chain but this has not yet been reflected on futures markets. Some metrics are inconclusive and some are conflicting. This tends to happen during structural changes in the market (for example going from macro bearish to bullish). Volatility remains quite choppy this suggests a large price breakout is NOT imminent yet. There is some evidence that a capitulation event has not yet taken place; normally we look for these events to signal a bottom.

Price action expectation: Sideways and reducing volatility over coming weeks before volatility and demand re-engages into the market. This may take a month or two from here (based on the timing signatures of prior bear markets).

Personal opinion: I think the market has started reversing, this will take some time to complete, and often it takes a sudden capitulation event to reactivate buying. It’s inconclusive whether that this has happened yet, I feel like we’re in a region similar to the 2018 bear market where price consolidated at $6k before a final capitulation before real demand came in. However in the present situation, if such a capitulation happens, I don’t think a downside move would be as dramatic, $30k-35k presents solid support.

All the best.

-W


The Elliot Wave Perspective

Looking at the chart below, we applied the chart pattern elliot wave script which gives the elliot wave count from a macro perspective.
The correctional wave ABC is in progress. The question is, is point C completed and it might mean one more dip to the 32K range might seal the point C level.

Analysis Breakdown

A significant uptick in Holders

The last 48 hours has seen a significant jump in demand from hodlers. Most of this came from coins scooped off Coinbase exchange. I’m awaiting confirmation on the accuracy of this data. Sometimes these kinds of moves are a result of coins moving to new unused addresses and by default is categorised as being hodlers only later to be found that the addresses belong to non-hodlers.

So tentatively (with the data at hand) we are seeing hodlers coming into the market strongly, but the futures markets have continued selling down. The two combined make for a neutral picture in demand and supply. The main significance is the situation is no longer as bearish as it was half a week ago.

The chart below shows the strength of hodlers in an oscillator view. I’ve marked in green prior regions when hodlers were in significant accumulation strength, nearly aways price responds in bullishness or at the minimum maintaining a sideways price action if the trend is bearish.

Whales have been selling

In contrast to the hodler view above, below is the 30 day sum of coins moving to and from whales. Whales have been selling off and maintain their bearish sell down. I post this chart to show how the market has mixed signals right now. This often happens in transitional phases.

Demand is slowly returning

Below is a chart of coins moving to and from hodlers over a 50 day moving average which gives a decent macro picture.

Coins have been selling down, but this has now started to revert to towards buying. If this continues, the bear season will be come to an end.

Please keep in mind that we do need to see demand coming from futures markets as well. Futures markets now play a significant impact to the long term demand and supply, something that was not so true only a year ago. So far we haven’t seen futures demand return.

In search of capitulation

All prior BTC bear markets have ended in a capitulation event (where inexperienced investors sell as price free falls), this is followed by an accumulation phase before the next bull market can engage.

The chart below is something new I’ve been working on. It looks on-chain to assess the average price that short term investors entered and charts the daily change in this value. In capitulation events, this cost basis drops dramatically; inexperienced investors dump their coins to experienced buyers signalling the bottom.

In the chart, I’ve marked the last bear market capitulations, which all had significant dips in the signal before accumulation took place. What’s interesting is the region we are in now has NOT yet exhibited a large dip, though the January price low may be considered one such event.

It’s inconclusive whether we have capitulated yet. There’s room for another drop based on this signal.

Wen dump, wen moon?

One thing that is consistent in markets is that times of low volatility lead to large breakouts and major price moves. Below is a chart of BTC price stability. We can see that overall, the market is still quite choppy and not typical of a zone where we’d see a significant breakout move.

GLASSNODE

The #Bitcoin Illiquid Supply Shock Ratio, first developed by @WClementeIII, has ticked significantly higher this week. llliquid BTC supply represents coins held in wallets with little to no history of spending. It is now 3.2x larger than Liquid and Highly Liquid supply combined