Bitcoin has noticed some upside in the past 24 hours after a brief recovery above $20,000. Investors who have closely monitored its performance over the past few weeks may have noticed that it is confined to a narrow range. However, it may be closer to the end of that range, and things are about to get more interesting.
Bitcoin has been stuck between the $19,000 and $24,000 levels for more than a few weeks now. It has only exited this range a few times since June, which means that the narrow range has spanned at least three months.
Bitcoin’s historical price action has seen periods of price trading within this narrow range, followed by a resurgence of highly volatile directional price movements. Now, if the same observation holds true for the dominant range, the cryptocurrency might be at the end of the same range as well.
Moreover, analysis of the long-term outlook for BTC indicates that it was reacting to its long-term support.
– MMCrypto (MMCrypto) September 17, 2022
Previous cases where the price interacted with the same support range were characterized by long bearish wicks. Thus, repeating the same would result in a major pullback, which would trigger a bearish trap before the next major uptrend.
The above observation is reflected in the long-term Bitcoin pricing model as well. The price of BTC, at the time of writing, is trading below the realized price zone. This is further evidence that the cryptocurrency is near the bottom of an ongoing bearish cycle.
BTC’s MVRV ratio also appears to indicate that it has regained ground. Now, this is not necessarily a guarantee that the price is now on the path to recovery. In fact, some bitcoin metrics suggest that the bears are far from dead.
For example, the number of addresses with more than 1,000 BTC has dropped dramatically since the beginning of September.
Addresses with more than 1,000 BTC have so far fallen to their lowest level in 4 weeks.
Moreover, the new address scale for BTC highlighted that the number of new addresses has slowed. These observations indicate outflows and a slowdown in growth. This reinforces the dominant short-term bearish narrative of the world’s largest cryptocurrency.
While long-term metrics suggest that BTC is at the end of its current range, short-term metrics require caution. Lots of traders are bound to get excited and this can lead to more long positions with leverage. Such an outcome would also be ready for an unexpected big sell-off that could lead to long-term liquidations, leading to further downside.
The above scenario would set the stage for a long bearish wick setup before the next major rally. A possible option, though not a guarantee. Such an example would also provide an opportunity to purchase at a larger discount.