For the bulls, the daily price action of Bitcoin (BTC) does not point to the desired levels. However, five key BTC price indicators seem to be in the “buy” zone, according to one analyst. Here are the details…
Bitcoin market is affected by many factors
Existing factors continue to put pressure on BTC price, such as:
- Persistent concerns over strict crypto regulation in the US.
- Fed monetary policy, interest rate hikes and monetary tightening.
- Russia, Ukraine, the European Union and the weaponization of natural resources.
- Strong sense of risk aversion due to the possibility of US and global recession.
Taken together, these challenges made high-volatility assets less interesting. The enthusiasm seen in the 2021 bull market has largely dissipated. Therefore, the daily price action is not encouraging. However, according to analyst named “Big Smokey”, some metrics offer some interesting data points for BTC.
The market still flirts with oversold conditions: what do Bollinger Bands say?
On the daily and weekly timeframe, BTC price is pressing a long-term descending trendline. At the same time, the Bollinger Bands, a simple momentum indicator that reflects two standard deviations above and below a simple moving average, are starting to narrow. Tightening in the bands usually precedes an upward move.
Comparison of RSI and Bitcoin’s multi-year movements
Price trading at long-term resistance is also typically indicative of a strong directional move. The sell-off of Bitcoin from March 28 to June 13 sent the relative strength index (RSI) to a multi-year record low. Compared to BTC’s long-term price action, the RSI indicates overbought.
According to the expert, regardless of the price of Bitcoin and its market structure, it seems appropriate for saving at the moment. Some analysts predict a drop to the $15,000–10,000 range. The $18,000 buy wall is likely to turn into a bull trap, according to Big Smokey. Alongside this event, the increased position size of oversold levels has yielded positive results for those brave enough to make a move.
What does the MACD show for Bitcoin?
Another interesting metric to display over the longer time frame is the “convergence/divergence of the moving average” metric. Like the RSI, the MACD is in the oversold area as the price of Bitcoin dropped to $17,600. While the MACD (blue) moves above the signal line (orange), it still appears to remain in the previously untested region.
The analyst points out that Bitcoin’s price has drawn lower highs and lower lows on the weekly chart. Because this is how the weekly chart moves, while the RSI and MACD move in opposite directions. This is known as the bull divergence. In terms of technical analysis, the confluence of multiple indicators shows that the current value of Bitcoin is low.
According to the analyst, the bottom is not in sight given that some non-crypto-specific factors continue to inject weakness into the BTC price. A drop to $10,000 marks a 48 percent drop from BTC’s current price of around $20,000.
On-chain data: What does the MVRV Z-Score indicate?
The MVRV Z-Score is a metric that reflects the ratio of BTC’s market value to its actual value (the amount people pay for BTC compared to its current value). Basically, if Bitcoin’s market cap is measurably higher than its realized value, the metric enters the red area, indicating a possible market peak.
When the metric enters the green zone, it indicates that Bitcoin’s current value is below its actual price. Hence, it indicates that the market may be near the bottom. Looking at the chart, the current MVRV Z-Score of 0.127 is in the same range as previous year lows and cycle lows. Comparing the on-chain data with the technical analysis indicators mentioned earlier shows that BTC is undervalued.
Reserve risk metric in Bitcoin at record lows
Another ten chain data point showing interesting data is the Reserve Risk metric. As the chart below shows, the metric signals when investor confidence is high but BTC price is low. The risk of buying and holding BTC versus the risk of reward or Bitcoin attraction enters the green area. Reserve Risk moves into the red area when investor confidence is low but price is high. As of September 30, data from LookIntoBitcoin and Glassnode point to record lows. Reserve Risk trading is at its lowest level ever and lies outside the green zone boundaries.
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