#forecast 017 : Tripping the power cord

Dear subscribers,

Welcome to The Bitcoin Forecast #017.

Since my last letter, price reached an all-time-high above $64k with heightened speculation in long positions. Speculators then  sold the price down as the Bitcoin network suffered a loss of hash rate as a result of power outages feeding many of the miners located in China. This ended in $4.9b in long liquidations plummeting price momentarily as low as $51k before settling at $55k.

Under weakened price action a second wave of sell off, this time from spot market investors, pushed price to $50k.



Top level summary for 25th April 2021 (current price $50.0k):

> Short term: A bottom signature pervades. Price is now at the estimated price floor supported by long term investors. Overleveraged speculation has been flushed from the system. Buyers have stepped in. There may be a little down side in short time frame dips, but overall the fundamentals point to price climb. The bottom is in, or very close to it.

> Long term: Price is in an extended consolidation band. This remains unchanged since the last forecast.

IMPORTANT NOTICE:

> I will be on Paternity Leave in May, once this goes into effect billing will be paused on your subscription until such time as this letter resumes.

> This letter marks the 6-month mark of this quantitative analysis letter being in existence. For the second half of this year I intend to change the format of this letter , I’ve opened up a discussion in the  comments section of the last letter. It’s there you’ll find the reasons why and I’m open to your feedback moving forward.

Analysis Breakdown

Price has hit the floor model

BTC has hit the floor price of $50.0k as of the latest close on 24th April. The capital flows into the network (from which the floor model is based) is forming a bottom pattern, so it’s quite likely the bottom of this correction has formed.

This is the first time we’ve hit the price floor in 2021 that’s to say the price is now 0% overheated and we are now at the fundamental price that long term investors will support. Interestingly in the 2017 bull market we hit this floor three times.

Exchange flows have reversed

Exchange flows were heavily bearish 21st – 23rd April. This was the cause of the second leg of the price sell-off.  These flows have now reversed, providing buying support.


I’d note that the reaction of the market to bearish exchange flows was very fast, the fastest I’ve seen. I take that as a sign of heightened fear in the market, with price having already weathered a speculative sell-off on derivative markets as a result of miners losing hash rate in China.

The average size of withdrawals from the exchanges is now larger than deposits, that’s to say we have larger buyers and smaller sellers; another sign of recovery.


Coins that were sold were young

The coins that were dumped this last week were very young. That’s to say these coins were bought recently and therefore arguably sold by less experienced investors. Typically  dips in coin dormancy have signals bottoms.

Profit taking nearing an end


Entity-adjusted-SOPR is very close to a full reset, the coins being moved between investors are now carrying minimal profit for the sellers. The market will need to be willing to sell coins at a loss to take prices lower, this is not seen much in a bull market. This is another signal implying we are very close to a bottom.

Hash rate hash been restored to the network

The hash rate drop that was the culprit for the initial speculative sell-off has now been restored.

Speculative markets are still in fear and indecision

The large quantity of speculative long positions we had for weeks has now been reset, as seen below with funding rates for long positions being very neutral. Contracts (open interest) in the system is also at local lows unseen since March.

There is no longer any overheatedness on derivative markets. Usually a good bottom indicator (be greedy when the market is fearful).
I’ll also mention the orderbooks on spot exchanges show thick demand for buys directly under the current price.

This BTC chart is post report and goes to validate if this report conclusion was accurate. Note the vertical line, is based on the date of this report