#forecast 018 : 2021 part 2
Welcome to The Bitcoin Forecast #018.
My last analysis came at a time of peak fear while on-chain signals were calling that the bottom was most likely in. Since then price has recovered to $58k having had a steady two week climb with low levels of speculative activity.
Top level summary for 8th May 2021 (current price $58.2k):
> Short term: Bitcoin price holds very little speculative premium and is currently priced at levels that long term investors will support. Speculation on derivative markets remains low, likely due to substantial losses incurred by traders 3 weeks ago. Net flows at exchanges show recovery with buying strengthening, coins are once again moving to strong holders at increasing rates. There’s also a decent probability that capital in alt-coins may start flowing into BTC in the coming weeks. Bitcoin at $58k is cheap according to on-chain valuation metrics.
> Long term: The current extended consolidation band marks the mid-point in Bitcoin’s 2021 bull market.
Price is very close to organic valuation
On-chain volume between investors has been climbing in a very healthy way in recent weeks. My NVT Price model which uses this investor volume puts the network very near organic levels of valuation with minimal speculative premium. We haven’t seen this since October 2020, Bitcoin is very cheap right now. Similarly,
the floor price supported by long term investors at $52k (daily close price) and is climbing steadily.
Similarly, the floor price supported by long term investors at $52k (daily close price) and is climbing steadily.
Derivatives markets have unwound from the heights of bullish speculation we had before the dip. Speculators have not yet entered in volume, most likely recovering from substantial losses 3 weeks ago ($5 billion of BTC liquidations). The recovery we’ve seen has largely been driven by spot investors buying. Once again, there is very little speculative premium in the system.
Exchange flows move into bullish territory
The bearish exchange flows that were responsible for the “bottom of the dip” sell-off have now subsided. Net flows at spot exchanges have just crossed over into the bullish region.
Net flows of BTC moving to and from spot exchanges (14 day moving average).
Coins resume moving to strong holders
All through this extended consolidation period, coins have been moving to strong holders. We did see a period of weaker bullishness in the last 3 weeks, however the trend is now moving into stronger bullishness once again.
Net change in highly liquid coins (negative values in the pink region denote coins moving to stronger holders).
Note this chart differs from the “Rick Astley” chart in prior letters in that it’s been adapted to be faster responding.
Capital in alt-coins may return to BTC soon
Alt-coin markets have been in a bullish frenzy since early March, this is the so called “alt-season”.
Below is a chart of Bitcoin’s market dominance over the entire crypto capitalisation. We are approaching a high probability zone for trend reversal this coming week.
Bitcoin Dominance Weekly chart shows a TD9 trend reversal coming this week (1 day away) in a region of Fibonacci support.
Should a trend reversal happen, the capital that went into alt-coin markets will return back into the BTC network.L
Long term macro is bullish
NVT Ratio compares the network valuation against the investment activity happening within it, this Bitcoin metric is analogous to PE Ratio seen in stocks. While some have feared a market top and a bear market developing, NVT Ratio tells us the longer range market structure is bullish. We are currently in a recommended buying zone.
Under the NVT Premium we’re ready to embark on the second leg of the bull market.
NVT Premium measures how far the price is above the organic valuation of the network using investor volumes. In this chart I have z-scored the results, this is a statistical method which normalises results across a long time span, allowing us to compare premium values from prior market cycles.