Analysts warned that a stronger dollar could hinder any new highs. However, Bitcoin`s on-chain measurements are drawing an upward picture after weeks of consolidation.
According to CoinDesk 20 data, the largest cryptocurrency reached its peak price of $ 41,962 on January 8 and has traded mostly in the range of $ 29,000 to $ 40,000 since then.
However, demand continues to rise above supply amid the price recession. “Approximately 26,000 BTC (+ 3.18%) has been mined so far in 2021. Meanwhile, Grayscale Investment Trust bought over 40,000 BTC over the same period, ”(based on Glassnode weekly report data)
In addition, the number of cryptocurrencies held in exchange addresses continues to decline, withdrawing sales-side liquidity from the market.
According to Glassnode, the Bitcoin balance held on all exchanges dropped to 2,349,040 on Monday, a 2.5-year low.
Meanwhile, the number of whale assets, clusters of crypto wallet addresses held by a single network participant with at least 1,000 BTC, broke a new record at 2,218 on Sunday. The number rose by over 50 during the last price consolidation, a sign of the ongoing accumulation of investors large enough to influence market trends.
Finally, as the 24-hour average of bitcoin’s adjusted output spent rate (aSOPR) has dropped to 1.00, a deeper drop seems unlikely due to profit making, indicating that cryptocurrencies moving between investors are no longer profitable. The SOPR metric measures the rate of profit of cryptocurrencies based on the prices when they last moved. ASOPR ignores all output with a lifetime of less than 1 hour.
Bitcoin ASOPR indicator
Investors often sell at a loss in bear markets, but Bitcoin is currently in a bull market and has risen 200% in the past three months.
In order for SOPR to fall, investors must be willing to sell at an unlikely loss given the current market shape. “We’ve been looking for this reset to get some stability in the market and pave the way for the next bull run,” Glassnode said recently. Historically, values below 1.0 have been consistently rejected during bull markets.
So the odds seem piled up in favor of a convincing Bitcoin move above $ 40,000. “The intermediate exit can take place within two weeks; Everything is on the rise, ”trader and analyst Alex Kruger told CoinDesk on Twitter.
However, Kruger pointed to the potential dollar strength as a short-term risk to bitcoin’s bullish outlook. The Dollar Index (DXY), which tracks the dollar’s value against major currencies, is looking north, and the daily chart is reporting an inverted head-and-shoulders (H&S) breakdown – a major bullish pattern (bottom right).
Bitcoin and Dollar Index daily charts
“If the bullish trend develops after DXY’s recent breakout, that could be a problem for Bitcoin,” Kruger said. The breakout opened the doors to rise to 93.00. The DXY was currently trading around 91.12 and there was little change during the day.
Stack Funds’ COO and co-founder Matthew Dibb expressed similar concerns when he pointed out that Bitcoin’s low rally of near $ 14,000 from the beginning of November occurred as DXY fell from 94.5 to 89.00.
Since the March markets collapse, Bitcoin has essentially moved in the opposite direction to the US dollar, and the cryptocurrency has witnessed consolidation or retracements during the USD gain strength. Bitcoin’s recent decline from record levels and the ensuing consolidation was accompanied by a recovery rally in the dollar.
The inverse correlation between the two is likely a result of the dollar’s negative correlation with risk appetite in global financial markets.
“When the sense of risk worsens all over the world; There is a natural desire to go to security in the form of US dollars. “Bitcoin, which is still a rising asset, is at risk,” Joel Kruger, currency strategist at LMAX Digital, told CoinDesk.
However, thanks to the Federal Reserve’s open-ended coin-printing strategy, the dollar’s overall trend has gone down, and analysts are confident about the cryptocurrency’s long-term prospects.
“In both the medium and long term, bitcoin remains attractive and ultimately, according to this long-term premise, Bitcoin should become a currency in demand in times of risk aversion,” Kruger said.