In the last few weeks, Bitcoin price created a fear zone near the $25K-$28K level, facing multiple resistance to initiate a clear breakout. Recovering from 2022’s bear market, Bitcoin has posted significant gains since the beginning of 2023 and displayed the strongest quarterly returns since its all-time high in October 2021.
The robust market performance in 2023 stands in sharp contrast to the previous year, indicating a potential positive shift in the market regime. In this analysis, we will delve into various on-chain metrics that corroborate this hypothesis, evaluating if we are witnessing a strong rebound from a bear market and if we have indeed moved past the bear market phase.
Bitcoin’s Current Market Situation Brings Opportunities
Bitcoin and several other cryptocurrencies are demonstrating an upward trend today in response to significant market developments. The price of Bitcoin (BTC) has surged beyond the $27K mark, propelled by the news of a debt ceiling agreement between President Joe Biden and Speaker Kevin McCarthy. The announcement of this deal, which Biden described as vital for cutting down expenditure, was made on Twitter. As of writing, Bitcoin is trading at $27.2K, showing an increase of nearly 2% in the last 24 hours.
Bitcoin: Long-Term Holder SOPR Shows Profitability
Analysing the long-term holder SOPR, Bitcoin’s long-term holders (LTHs) are presently experiencing profits as the indicator hovers around 1, despite the BTC price encountering several resistance levels. In the past, a resurgence in profitability for long-term holders has often signalled significant market upswings.
Currently, the indicator stands at 0.96, indicating a slight decrease in profitability for LTHs. However, it has managed to sustain a steady range above 1-level over the past few days.
Nonetheless, there has been a significant sell-off by long-term holders in recent weeks. This occurred as the metric reached a value above 2 when the BTC price reversed its trend, surpassing 28K or hitting a weekly high.
If the value of this metric exceeds 1, it indicates that investors are collectively making profits from their current sales. Conversely, values below this threshold suggest that the market as a whole is acknowledging losses.
When the SOPR is precisely 1, it implies that investors are merely breaking even on their investment. At this value, the total profits realised are equivalent to the losses incurred.
$28K Is The Bullish Sentiment For BTC Price
The $28K mark is currently being viewed as a bullish sentiment indicator for Bitcoin’s (BTC) price. This sentiment is further reinforced by the spike in short liquidations observed near this price level.
Short liquidation refers to the process where short positions, i.e., bets on the price of BTC falling, are closed out. This usually happens when the price of BTC rises to a level where those holding short positions start to incur losses. In order to prevent further losses, these short sellers are forced to exit their positions by buying back the BTC they initially sold.
When the BTC price approaches the $28K level, an increase in short liquidations is observed. This suggests that as BTC climbs to this level, sellers are exiting their short positions. This action of buying back BTC to close out short positions creates additional buying pressure in the market, which can drive the price of BTC even higher.
According to our on-chain data, short liquidations reached $67 million on April 26 when the BTC price surpassed the $28K mark. Furthermore, today witnessed a surge in Bitcoin’s short liquidation by more than 360% compared to yesterday. This surge was triggered by positive momentum in the Bitcoin price, which broke above the $27K level recently, leading to the activation of stop-loss orders for short sellers.
Bitcoin Exchange Inflow Touches 9-Year Low
The Bitcoin exchange inflow has recently hit a 9-year low, a development that could have significant implications for the upcoming bull run of Bitcoin (BTC). On-chain data shows that the BTC exchange inflow is currently at 4587 BTC, the level which was last seen in 2014.
Exchange inflow refers to the amount of Bitcoin being deposited into exchanges. When the inflow is high, it typically indicates that investors are moving their Bitcoin onto exchanges, often with the intention of selling. Conversely, a low inflow suggests that fewer investors are depositing their Bitcoin into exchanges, which could imply less selling pressure in the market.
The current 9-year low in Bitcoin exchange inflow is a positive sign for Bitcoin’s potential bull run. Here’s why:
- Reduced Selling Pressure: With fewer Bitcoins being moved onto exchanges, there is less likelihood of large sell-offs. This reduced selling pressure can create a more favourable environment for a price increase.
- HODLing Behavior: The low inflow could also be a sign that more investors are choosing to hold onto their Bitcoin near the $26K-$28K level, anticipating future price increases with a breakout at $28K. This “HODLing” behaviour can contribute to a decrease in supply on exchanges, which, combined with steady or increasing demand, can drive prices up.
- Market Confidence: A decrease in exchange inflow can be interpreted as a sign of confidence in the market to push BTC above $30K. If investors were fearful of a significant price drop, they would likely be moving their Bitcoin onto exchanges to sell. The low inflow suggests that many investors remain confident in Bitcoin’s potential for growth.
The Bitcoin market is teetering on the edge of a significant shift. The recent weeks have seen Bitcoin claw its way out of a fear zone, facing multiple resistances and yet managing to show signs of a strong rebound. The current market dynamics, coupled with the bullish sentiment around the $28K mark, suggest that we might be just one step away from a Bitcoin bull run.
The profitability of long-term holders, the spike in short liquidations at key price levels, and the 9-year low in Bitcoin exchange inflow all point towards a market ripe for a bullish surge. The reduced selling pressure, the prevalent HODLing behaviour, and the overall market confidence further strengthen this outlook.