The hype over Bitcoin has faded somewhat over the last week. This is a reassuring development since the market tends to go in the opposite direction when euphoria sets in. Temperance and patience are the name of the game after all. But this seemingly calm situation might not last very long.
In this issue:
- Underlying strength
- Mining difficulty signals confidence
- Bitcoin technical analysis
- Latest happenings
- Litening material
Taking a close look at on-chain developments, there has been a slight uptick in transfer of Bitcoin supply from long-term holders (LTHs) to short-term holders (STHs) in the last month. Specifically, the 1w-1m holders have increased holdings to 5.6% since June, while 1m-3m holders have decreased holdings to 6.44%.
Longer-term holders (1y-2y & 2y-3y) have retained relatively steady holdings over around 13.5% and 15.5% in Q2, respectively. The shift is typical of early bull-market cycles, with new participants favouring short-term gains over longer-term investments. Conversely, some longer-term holders, in this case the 1m-3m cohort, take profit.
So far, these short term coin movements do not indicate a major shift in the overall market direction.
Bitcoin mining difficulty signals confidence
Bitcoin’s mining difficulty has reached an all-time high, indicating a growing robust network and miner confidence. Miners are clearly positive on Bitcoin and continue to pour in resources into the asset.
At the same time, the Bitcoin Miner Supply Ratio (MSR) is declining. After a spike on June 1, Miners continued sending coins to exchanges, possibly to hedge their position(s), take profit or to offload assets for operational fiat liquidity.
From a technical point of view, Bitcoin/Dollar has been oscillating in a narrow range between $29,500 and $31,500, with selling pressure largely coming from short-term trading activity, as noted. Prolonged tight range-trading suggests market maker activity in preparation for a larger directional move.
As noted last week, $28,000 and $27,500 could be local areas of support should the range breakdown. Conversely, upside targets remain $36,000 and $44,000, respectively. Against a backdrop of underlying market strength, dips into downside targets could be viewed as an opportunity to buy cheaper coins.
Locally, the run-up to $31,800 on July 13 took place on the back of surging positive news about Bitcoin. The move up was followed by a vertical sell-off, underlining the importance of largely ignoring the news when it comes to making short-term financial decisions.
All in all, BTC/USD has registered a daily broadening range when measuerd at the daily close. Broadening trading ranges tend to result in an explosive breakout in one direction. Failed breakouts are rocket-fuel for the opposite side, as traders will have to buy-back underwater positions at a premium, adding fuel to the fire.
Given this context, while a pullback below $29,500 is certainly possible, the odds of a directional shift that exceeds expectations (sub $27,600) on the back of robust fundamental tailwinds are fairly low.
Spot buyers may choose to take advantage of short-term futures-based price gyrations in anticipation of this Bitcoin bull-market cycle. That said, there should be no illusion that most side-lined buyers will wait far too long to finally press the green button. It is what it is.
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The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Tuesday. I am not perfect and this is not a science — nor is this newsletter analysis a signals service or financial advice. While I cannot promise perfection I do my best to be honest and transparent.
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