Bitcoin (BTC) remains stuck below the $29,000 level amid a lack of new positive catalysts to sustain the bullish momentum that saw it hit a new yearly high around $31,800 earlier this month.
The cryptocurrency is currently holding above its 50-day moving average at $29,100 as Wednesday’s Federal Reserve policy announcement approaches.
The market expects the central bank to eventually raise interest rates by 25 basis points to 5.25-5.50%, the highest level in 22 years.
While this expected rate hike is unlikely to impact Bitcoin, the bank’s tone on the outlook for new rate hikes could spark some volatility.
The Federal Reserve has said it may raise interest rates again later this year given the continued strength of the labor market, but a recent improvement in U.S. inflation has eased pressure on the bank to continue raising rates.
The fact that the Fed’s tightening cycle is coming to an end is widely cited as a key reason why Bitcoin’s price outlook is bullish from here on out — traders will recall that the Fed’s aggressive tightening last year in response to surging inflation was a key reason why Bitcoin’s price took such a hit.
Other factors, such as increased institutional interest in Bitcoin (represented by the recent wave of spot Bitcoin ETF applications from Wall Street heavyweights such as BlackRock) and XRP issuer Ripple’s recent partial legal victory with the U.S. Securities and Exchange Commission (SEC), are arguably also major drivers of Bitcoin’s prospects.
But it’s not just fundamentals that suggest Bitcoin’s prospects are improving.
The following ten widely followed technical and on-chain indicators suggest that the bull run that began in 2023 is still alive and well.
Bitcoin is back above the 200-day moving average, continuing to provide strong support
When Bitcoin re-crosses above its 200-day moving average after being below it for a long period of time (as was the case in January), this has historically occurred in the early stages of a new bull cycle and has historically been a very good long-term buy signal.
Bitcoin returns above its actual price
Around the same time that Bitcoin broke through its 200DMA, it also broke through its actual price, which is the average BTC price at the time each BTC coin last moved (a proxy for the average price investors paid for their Bitcoin).
The chart below, from cryptocurrency analytics service Glassnode, shows how when Bitcoin recovers to the north of its realized price after a long period below its realized price, it typically signals the start of a new bull run.
New address momentum remains positive
The 30-day SMA for new Bitcoin address creation crossed above the 365-day SMA from November last year, suggesting that the pace of new Bitcoin wallet creation is accelerating. Historically, this has occurred at or near the start of a bull run.
Fee income is rising
Glassnode’s revenue-to-fee multiple surged a few weeks ago, pushing its 2-year Z-score above 0, suggesting that demand for block space is accelerating.
The Z-score is the number of standard deviations above or below the mean of the data sample.
In this case, Glassnode’s Z-score is the number of standard deviations above or below the average Bitcoin fee revenue over the past 2 years.
This shift in the 2-year Z-score of the fee-to-income multiple to above 0 typically occurs early in a bull market, marking the beginning of a period of on-chain expansion.
Market profitability returns
The 30-day simple moving average (SMA) of Bitcoin’s realized profit and loss ratio (RPLR) indicator is above 1 and rising.
This means that the Bitcoin market has realized a higher proportion of profits (in USD terms) than losses.
“This generally means that sellers of unrealized losses have become exhausted and there is a healthier inflow of demand to absorb profit-taking,” Glassnode said.
Meanwhile, the 30-day SMA for Bitcoin’s adjusted spending-output profit ratio (aSOPR), a metric that reflects the extent of realized gains and losses for all coins moved on-chain, is also above 1.
This essentially means that on average over the past 30 days, the market has been profitable.
Looking back at Bitcoin’s history over the past eight years, aSOPR has risen above 1 after being below 1 for a long time, which is an excellent buy signal.
Elsewhere, the 90-day exponential moving average (EMA) of Bitcoin’s supply profits has also been trending upwards over the past 30 days.
Profit supply refers to the amount of Bitcoin that last moved when the price in USD was lower than the current price, meaning they were bought at a lower price and the wallet is holding a paper profit.
“A change in the macro trend of profit supply volume can indicate a recent shift in an investor’s cost basis between unrealized profits or losses,” Glassnode said, adding that “these conditions often occur around macro market cycle changes.”
Bear market sellers are exhausted
The following two indicators are related to whether the balance of dollar wealth has shifted sufficiently in favor of holders to indicate that weak-hand sellers have been exhausted.
Glassnode said Bitcoin’s realized HODL multiple has been in an upward trend for at least 90 days since bottoming out late last year, which is a bullish sign.
“When the RHODL multiple turns to an uptrend within a 90-day window, it signals that dollar-denominated wealth is beginning to shift toward new demand inflows,” the crypto analytics firm said.
HODLER confidence remains high despite still lower prices
After hitting an all-time low following the FTX crash in November last year, a measure of Bitcoin holders’ conviction called “reserve risk” has gradually recovered but remains historically low.
According to Glassnode, reserve risk is “used to assess the confidence of long-term holders relative to the price of the native token at any given point in time.” Reserve risk is “a long-term cyclical oscillator that models the ratio between the current price (the incentive to sell) and the belief of long-term investors (the opportunity cost of not selling)”.
The conviction of long-term investors is reflected in Glassnode’s “HODL Bank” index, which represents the accumulation of unspent “opportunity costs” the longer HODLers refuse to sell. Reserve risk is therefore defined as the current Bitcoin market price divided by the HODL Bank Index score.
Glassnode says the risk/reward of investing in Bitcoin is attractive when confidence is high and BTC prices are low (implying a low reserve risk score).
Therefore, the indicator can be said to be sending a strong buy signal.
