Has Bitcoin Bottomed? (Technical Analysis)

Thesis Summary

With the latest rally, many investors are calling for a Bitcoin (BTC-USD) bottom to be in. In this article, I present compelling evidence that this could be the case, though I still hold that, given the macroeconomic outlook, if not a new low, we should re-test these recent lows in the second half of the year.

We’ve broken resistance; for now

First and foremost, it is worth mentioning that, following the recent rally, Bitcoin has broken above the trendline resistance coming from the top of the bear market. This is an initial bullish signal, and combined with other metrics helps build a bullish case as long as we can remain above it.

Another key metric shown below the price chart is the hash ribbons. We can see below the Bitcoin price chart that the 30 day hash rate Moving Average has crossed above the 60 day MA. This has triggered a buy signal, which in the past has been a good indicator of an impending rally. The hash ribbons show a shift towards positive momentum in Bitcoin mining.

The Halving Cycle

The halving cycle has been a theory used to predict Bitcoin tops, bottoms and turns for some time, and so far it hasn’t failed. We can see that, since its inception, Bitcoin’s price follows very clear dynamics before and after each of its halving events, where the mining reward of Bitcoin is halved.

Following halving events, Bitcoin rallies for around 2 years. This is followed by a bear market and a consolidation phase as we approach the next halving event.

For reference, last time, Bitcoin bottomed 517 days before its halving. Bitcoin struck a low at $15,500, just around the 500-day mark

Speaking of cycles, it’s also worth mentioning that in the last bear market, BTC spent 386 days beneath the 200-day MA, which we have broken above now, after 381 days beneath it.

On-chain metrics

Some other interesting metrics can be found on the Blockchain itself. Since all transaction data is available to us, we can gain some interesting insights by examining what transactions have taken place and who has carried them out.

In the chart above we can see a visual representation of the Realized Price, the Realized Price for Long-term holders and the Realized Price for Short-term holders.

Now, the realized price, which I’ve talked about before, is the average price at which each Bitcoin moved last. In a way, it can be seen as the break-even point of the market. Below the realized price, the market is in losses, and when above, it is in profits.

Now, we also have the Short-term holder realized price, which is the realized price for coins that have been held under 155 days, while the long-term holder realized price is the realized price of coins held over 155 days.

It’s important to note that these are not static lines, even though they are represented as such in this chart. The value of the realized price changes with every transaction. This is why the STH Realized Price is the lowest of the three. This shows that a significant amount of coins moved during the last sell-off, which lowered the Realized price for this cohort.

What’s notable is that the actual price has now broken above these three metrics, which has completely shifted the momentum in the market. People who have just bought Bitcoin are in profit, which could revive market sentiment. For a long time, Bitcoin has failed to push higher due to a lack of interest by the general public, who was still burned from the descent from all-time highs. As price climbs, this momentum shifts, and breaking above these profitability points is a key metric.

What to look for moving forward

So, has Bitcoin bottomed? The only adequate answer I can give is that there is insufficient evidence of this. For starters, we have yet to break above the 200-week moving average.

This metric is also watched closely in Bitcoin. In the past, it has acted as strong support in bear markets, but also as a strong resistance. The 200 week moving average currently stands at around $24,500. It’s interesting to see that the 50 week moving average is converging here and this is also very near where Bitcoin made a local top in May.

From an Elliott Wave perspective, we also don’t have enough evidence to call for a bottom. We have yet to complete an initial five-wave impulse for a large degree wave 1. Once that is complete, we must see a corrective retracement that holds the recent low. This would be a good point to enter the market. But, still, we wouldn’t truly confirm a bottom is in until we rally back above the wave 1 high.

Takeaway

If we can break above the 200-week MA, then the next spot of resistance would be just south of $30,000. From there, I would expect a substantial pullback, which, if corrective, would give us an opportunity to go long back at around $20,000, though I can’t give exact levels. I am still sceptical of this rally since we haven’t reached the Delta Price, but strong evidence supports the case that a bottom is in. Ultimately, these are good levels to build a position, and for those still uneasy, a clearer opportunity should present itself in a wave 2 pullback.