After a stunning performance in the first half of 2023, Bitcoin’s price appears to have stalled, trapped between $29,000 and $31,500.
There is reason to believe that in the short term, the price of Bitcoin will tend to trade sideways or fall. This article can be based on three factors, two of which involve technical analysis and the third on fundamentals.
Bitcoin price resistance holds firm at $32,000
Capriole Investments founder Charles Edwards recently issued a market update in which he noted Bitcoin’s failure to break through significant resistance at the $31,000 to $32,000 levels:
“Bitcoin is facing the most significant resistance level on the chart at $32,000. Despite the overwhelming amount of positive news coverage in the cryptocurrency industry over the last month; from the Blackrock ETF announcement, XRP legal victory to presidential candidate Kennedy saying today that he will use Bitcoin Support USD; nothing can help Bitcoin maintain momentum above $31,000.”
The report goes on to note that if such significant positive news does not translate into upward price momentum, this in itself could be a bearish sign.
Can Bitcoin Support at $29,500 Hold?
While Bitcoin has not been trading much below the $30,000 mark for nearly a month, the lack of resistance below $29,500 suggests that a breakout from the current consolidation could lead to further losses.
The next major support level for BTC/USD is not seen until near $27,500. Not only does this level serve as support based on previous price action, but both the 200-week moving average (MA) and the 200-day moving average have begun to converge below it.
BTC/USD has remained within a tight consolidation range over the past month. Support for this range appears near $29,500. A daily close below the support could open the way for further declines towards $27,500.
However, trading volume has been declining, suggesting that the recent decline may not be as bearish as it seems. If volume picks up during another pullback, bears could easily take control of the market.
Bitcoin network fundamentals in trouble
The report cited earlier emphasizes that "price is only half the problem." Fundamental factors also come into play. Perhaps the most worthy of consideration are those related to:
What happens to on-chain traffic?
How do investors allocate funds?
How does overall market sentiment and the macro environment affect Bitcoin?
Is cybersecurity increasing?
The Capriole Bitcoin Macro Index is an aggregated measure of 40 fundamental Bitcoin variables, including on-chain, macroeconomic and stock market indicators.
The report concluded:
“Today’s macro index remains in a relative value period (below zero), suggesting good long-term value for multi-year investors. However, the index has just re-entered contractionary territory. After a 7-week recovery (from early June (starting at $26,000), on-chain and macro fundamentals have begun to trend downward.”
Bitcoin’s long-term bull thesis is still in play
Despite these recent bearish developments, there is no reason to worry about the long-term outlook. With less than a year until the next halving, good news continues to come.
Perhaps most importantly, hash rates have increased by 50% in the past six months alone. This shows that the Bitcoin network is stronger than ever and continues to grow at lightning speed.
