This is the million bitcoin question to which nobody would know the answer for certain.. Here goes my little spoiler alert, I don’t know if we’ve seen the bottom. So, what could we possibly say about the current market conditions for bitcoin?
Talking exclusively about price, at the moment of this writing (early July 2022), we are sitting slightly above the $20K support line. Some weeks ago, on June 18th we witnessed a historical event when bitcoin price went down as low as $17,7 K. This was the first time in bitcoin history that the price of the most popular cryptocurrency went below the all-time high of the previous bull run (the 2017 bull run in this case).
In this article, I want to present some of the most classic and useful indicators used by the most popular and prominent bitcoins scholars.
As we go through them, we will see that we are experiencing a very unique moment in bitcoin history. And, if you believe that this is a technology and an asset which is here to stay, then this may be a very good time to keep accumulating some satoshis.
Stock to Flow
Stock-to-flow models, S2F for short, have been used for many years now when considering prices for different commodities such as gold and silver. The S2F model for bitcoin was first developed by PlanB and rapidly became one of the most popular models trying to predict bitcoin’s behavior. According to it, the bitcoin price should be close to $87 k at this moment.
Following this Twitter account you can track how bitcoin prices behave relative to the S2F model on a daily basis.
200 weeks moving average
We know that the bitcoin price is volatile, so using a 200-week moving average regression we can significantly reduce the noise caused by volatility, and at the same time, we can see that the price has been always evolving up and to the right. On June 18th, bitcoin price went below this important indicator- and the few times that this has happened before, it has always been a clear indication of bottom.
Bitcoin realized market cap
Here we have another important line that has been broken to the downside. The realized market cap for bitcoin is the result of multiplying each coin that has been ever moved by the price it had when it was last moved. The realized market cap has historically increased and has been a good support line over time.
The RSI indicator is a well-known one, used across all markets, it compares the strength of buyers to sellers of a given asset. At a level of almost 40, we had never seen it be this low in bitcoin’s history.
This is the first cycle where bitcoin could be considered a significant player in the global financial markets. Up until now, bitcoin has been in its own parallel crypto universe, and I think that those days are gone now.
We don’t have to forget that we are still processing the consequences of the pandemic and all the stimulus checks sent by the governments all around the world; this was the fuel that activated the 2020 bull run in the first place.
Most countries are seeing inflation hitting hard, fiat currencies are being devalued, and this is something that the governments can not allow to happen for a long time. The US Federal Reserve has started to increase rates, and most likely they’ll keep on doing this for quite some time. This rise in interest rates forced a lot of the most important financial institutions to re-evaluate their allocations, and more volatile assets like bitcoin and crypto are the first to be sold seeking more secure and traditional instruments like bonds.
These, and many other factors, are not considered in the graphics and charts presented above, but without any doubt, they could have a significant implication on the future price action for bitcoin.
This has not been an inducement to do any specific purchase, and remember that every model is right until it is not.
Edited by: Jelly Bean
Nacho is a writer for The Pulse. He is mostly involved in NFTs, Bitcoin and Ethereum ecosystem. Freedom advocate.
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