After a fierce battle by bulls to maintain the price atop the $18,000 multi-year support zone in the past three months, Bitcoin managed to recapture the $20,000 level on Tuesday, pushing as high as $20,467 and igniting hopes of a further price recovery.
This week’s rally has been attributed to, among other reasons, signs of the Fed pivoting away from its so-called “liquidity tightening” following a cautionary statement against “an unduly rapid tightening of monetary policy” by the United Nations on Monday.
Onchain Metrics Improve
Despite the prolonged slow-down, Bitcoin’s fundamentals also seem to be improving in hindsight, suggesting a solid rally could be in the offing. According to the latest data by crypto analysis firm Crytoquant, the percentage of Bitcoin’s supply loss reached 50% for the first time in this cycle.
“BinhDang” a verified analyst with the firm suggests that Bitcoin may have hit rock bottom prices basing his analysis of previous loss supply levels. “Based on my analysis posted on QuickTake, the lowest bottom of the previous cycles always occurs when the percentage of supply loss reaches 50% or more. We have now recorded the highest percentage of losses at 52% on daily data.” BinhDang wrote on Tuesday.
Looking at the Exchange Inflow SOAB metric, a tool that bundles spent coins into categories depending on their age, participants who bought BTC at prices above $30K following the Q1 and Q2 sell-off have recently capitulated and exited the market at an approximate 50% loss. Based on historical data, these capitulations tend to occur during the last months of a bear market, pointing to a potential bottom formation.
Miners seem to have also downsized their dumping, with data from Glassnode showing that distribution has slowed to around 4.5k BTC per month. This marks a decline of 50% since the peak in early September, with miners currently holding some 78.4k BTC.
However, given that miner revenues have only just recovered from the recent capitulation, the firm warns that miners could come under “acute” income stress with the mining hash rate tapping new all-time highs this week, driving higher production costs. However, a reprieve for market participants could unfold if the cost of production hovers just below current prices, as per the firm.
Nevertheless, some traders are still eyeing higher prices. Seasoned crypto analyst Kevin Svenson expects BTC to push higher after the price comes back to retest a “legacy $69K downtrend line”, which was broken yesterday.
Michaël van de Poppe CEO & Founder of trading platform Eight Global, predicts a consolidation of around $20,700. “Resistance at $20.7K for scalp shorts; otherwise, $22.4K seems next. Area for longs is at $19.6K area, doubt we’ll see that happen, but if we get there, definitely interested.” Poppe Tweeted on Wednesday.