Our previous statistical study of June 2023 showed that “the $30,000 to $31,000 area would be the next major threshold”. Moreover, “its crossing with volatility and conviction would be a very powerful signal”. While the $30,000 target has been reached, bitcoin is now struggling to make new highs. Statistical decryption of the situation of bitcoin (BTC).
Stagnation on the $30,000
The chart below shows bitcoin (BTC) struggling to make new highs for the past few weeks. This threshold is all the more important as it corresponds to a zone of polarity in relation to the bitcoin’s long-term trend line. The last high recorded on the price of BTC stands at $30,800.
In detail, the graph opposite shows the price of bitcoin (BTC) adjusted by its linear trend over the last 3 years. It is clear that, compared to the whole of the last bullish cycle, the current level is a strategic level. The issue remains, as we have specified, the crossing of the threshold of $30,000 to $31,000. We specified in our previous article that, “in the opposite case, a more lasting correction could be envisaged with an exit from the uptrend since January. But this hypothesis remains minor following the recent rebound in prices..
Bitcoin underperforms indices
Beyond this stagnation, it is notable that bitcoin is still underperforming the S&P 500. Bitcoin is no longer worth ” that “ 4 times the S&P 500, compared to almost 11 times just 1 year ago. Bitcoin’s lack of outperformance argues in favor of the idea that it is not engaged in a real bull market. Therefore, one of the major causes of the absence of new peaks in the price of bitcoin is the rebound in volatility on stock market indices. A wave of stress in traditional markets would be threatening for cryptocurrencies so far.
In our article on the correlation between bitcoin and indices, we elaborate.
” The recent rise in the price of bitcoin does seem to be accompanied by a significant decrease in the volatility of the indices. The VIX, the volatility benchmark on the S&P 500, has fallen below the 13 level. This is simply the lowest level of volatility since January 2020. Consequently, any resumption of volatility on the traditional markets would be likely to slow down the rise of bitcoin. […] At the end of June 2023, the 6-month correlation between bitcoin and the S&P 500 is close to 70% to 75%. Which is enough to say that bitcoin will likely follow the trajectory of the indices. But we saw that a return to volatility would penalize bitcoin.”
Bitcoin remains correlated to indices – Tremplin.io
The persistence of bullish signals
After a brief rally above $25,000 in June, a bullish reactivation set in. From January 2023, we showed that the bear market was neutralized, and that we could witness the return of a bull market. Now, if the trend has remained bullish since the start of 2023, the difficulty of making new highs raises legitimate questions. At the end of 2022, the fractal indicator (Hurst’s coefficient) clearly showed that the downtrend was very persistent.
As a reminder, the Hurst coefficient is generally between 0 and 1. So, “It may exceptionally happen, on very volatile assets such as bitcoin, that the coefficient exceeds 1. Generally, a coefficient greater than 0.5 indicates a persistent positive trend. Conversely, a coefficient below 0.5 indicates a persistent negative trend.. The passage under the Hurst coefficient below the level of 0.7 constitutes a clear positive signal. It is equivalent to the signal observed in October 2020.
Moreover, the current volatility of bitcoin (BTC) measured over the last 30 days is close to 30%. It has averaged 50% over the past three years. The low volatility since April is also one of the main explanations for the lack of strength in the upward movement. Despite everything, the minimum volatility seems to have been reached with the minimum of the bitcoin price in January 2023.
Buying strength remains persistent in the market
We also observe, despite the failure on new resistances, that the fundamental support remains significant. The accumulated volumes indicator (volumes proportional to variations) remains pleasantly oriented. Likewise, the long-term moving average is approaching $26,000 and its trend is clearly bullish.
As a result, the graph below shows the indicator of cumulative variations. That is to say, the sum of the price variations observed on bitcoin (BTC) is calculated. Variations that are ultimately more bullish than bearish will show a curve above the 0 line. Therefore, we can clearly notice that the statistical trend remains bullish.
It would take bitcoin (BTC) falling below around $26,000 (i.e. rounding the moving average) to see a stronger bearish signal. Conversely, a return of bitcoin to around $27,000 would probably not reverse the uptrend.
Seasonality seems consistent
On the other hand, July is generally a bullish month and quite reliable. In fact, this seems to be true in 2023. Between mid-June and mid-July, the performance of bitcoin (BTC) exceeds 12%, which is close to the historical average. However, August and September can be months of stagnation and correction. We will therefore be particularly vigilant that the end of summer does not put an end to the trend observed since January.
Consequently, the trend in the price of bitcoin (BTC) could diverge from what has actually been observed since January 2023. We have seen that several elements indicate that a passage of bitcoin below $26,000, and more durably below $25,000 , could lead to a breakout of the trend towards $21,000 or $20,000. It is advisable, under these conditions, to ensure that the buying force is well supported during the summer of 2023. Otherwise, this would reduce the upside potential for the coming months.
The halving scheduled for April 2024
This is an event eagerly awaited by the crypto community. Indeed, each halving (which consists of reducing the creation of bitcoins) generally confirms the entry of BTC into a new bull market. If this does not bode well for what will happen in 2024, many investors are waiting for opportunities in the coming months. As a reminder, the “halving” bitcoin is a timed event that occurs approximately every four years, where the reward given to miners for each validated block of transactions is halved.
In addition, a fundamental element seems to us to go in the direction of the halving. Indeed, the average production cost incurred by miners has increased significantly since the beginning of the year. According to the available data, this cost of production would be $35,000 in July 2023. However, we know that the cost of production is a major long-term support for the price of BTC. In this respect, it is possible for us to affirm that the current value of the BTC does not correspond to its value “material”, which is the minimum cost at which new units can be issued. Under these conditions, we have to deal with favorable arguments which militate for the hypothesis that the price of bitcoin will be at least at its current level by the end of the year. But this should not ignore the technical elements.
Ultimately, the price of bitcoin is struggling to sustainably exceed the $30,000 area. The risk is obviously that of breaking the upward trend observed since January 2023. If the month of July remains bullish for the time being, and in a manner consistent with seasonality, it is possible that the coming months will induce greater instability. Despite everything, the current medium-term signals remain positive. While the accumulated volumes seem to be holding, the statistical strength persists, and the cost of production increases, while the slight increase in volatility supports all of these observations. The area around $26,000 appears to be a major zone as of today, and the lack of a rally in volatility on the traditional indices will likely determine further movement.
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