BTC Exchange Flows Witness The Largest Spike Since July 2021

Bitcoin range-bound price action continues in preparation for an explosive move. Meanwhile, exchange flows have been increasing Bitcoin’s illiquid supply since July 2021, with the most recent spike taking place last Friday.

All this as US inflation hits 7.9%, the highest ever figure in over 40-years.

Let’s dig in.

Dear readers,

The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Monday and Wednesday. I am not perfect and this is not a science — nor is this newsletter a signals service. While I cannot promise perfection I do my best to be honest and transparent.

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The Bitcoin network’s total processing power breezes above 200 exahashes per second (EH/s) as exchange withdrawals hit the highest rate since July 2021.

Two weeks ago on Feb 27, the BTC hashrate slipped modestly to 169 EH/s after tapping an all time high of 249 EH/s on Feb 15. Following the drop, bitcoin miners caught a short break as mining difficulty adjusted for the first time in several months.

Technically speaking

Bitcoin/Dollar continues to trade within the same consolidation structure discussed last week. The pair is effectively flat week-on-week, up 1.6% exchanging hands at $38,900 at the time of writing.

To avoid repetition, we’ll look at different indicators and lower time frames in this analysis.

The H12 BTC/USD chart indicates that Bitcoin is still consolidating between $36,600 and $45,000. The former price-tag takes into consideration the tendency for the pair to ‘fake-out’ to one side before swinging in the other direction. In fact, it’s prudent to expect such market behaviour when the books are relatively thin.

The Moving Average Convergence Divergence (MACD) is a trading indicator designed to reveal changes in strength, directional momentum and the duration of a trend. It is a lagging indicator that’s typically used for longer-term time-frames. In this case, price-action consolidation is echoed in this indicator, such that sell-side pressure is dissipating (lower consecutive bars in the last two sell-offs) as it nears a breakout point. Should sell-side pressure succumb to buyers, the moving averages would witness a bullish cross within 48–72 hours.

A similar situation is unfolding on the relative strength index indicator (RSI), which suggests that a significant move can be anticipated within the coming days. Notably, there’s more room for downward pressure on the RSI. In fact, consolidation could even last until the first week of April if the MACD breakout turns out to be inconsequential.

On the H4 time-frame, the local range is defined with confluent weekly resistance at the $45,000 level, and support at $36,600. A re-test of the weekly S/R would be a 5th retest of the level in just over 2 months, while $36,600 remains a point of interest in terms of market liquidity. In prior sell-offs, prices fell just short of sweeping the lows over the last two weeks, which market makers may be targeting.

The H4 relative strength index shows a modest upwards slope though nothing to take to the bank given the headline-driven cerebral context of the markets right now. Additionally, H4 divergences are significantly more useful when it comes to playing counter trends on higher time-frames.

Funding rates on perpetual futures contracts have been flat for the most part with bouts of positive and negative aggregated rates (+/-0.01)

Still, the overall context is that negative funding is prevailing given that markets tend to trend up more often than not. Therefore marginally positive funding is normal not zero. In short, the current funding regime is a tailwind for bulls. If I had to guess, I’d say a fake-out lower followed by a swift reclaim isn’t unlikely, and would be a strong signal that the market is ready to take out $45,000.

Without trying to sound the alarm bells, a $10,000 move is not out of the realm of possibility once this consolidation structure gives way. If Hades awaits, I do not expect any weekly closes below $30,000.

Regardless, BTC/USD is much closer to its maximum value proposition than it is to being overvalued. In my view, we are experiencing a bottoming process.

Catch you later.

p.s. This is my opinion. It is not financial advice.

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Originally published at https://mailchi.mp.

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Journalist-turned crypto-writer & analyst; forging the narrative, stacking sats.

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Chris on Crypto

Journalist-turned crypto-writer & analyst; forging the narrative, stacking sats.