Bitcoin (BTC) rose to $65,000 over the weekend (August 24-25), continuing a three-week recovery since its crash on August 5 and continuing its rally to $49,500.
As prices return to the comfort zone of many investors, traders will be wondering whether trading will continue in the same range, whether consolidation will occur, or whether a range expansion will occur towards new highs.
Now let’s take a look at some Bitcoin price data points to see if it’s time for BTC to break out of its current range.
DXY falls to lowest level since the beginning of the year
The interaction between the US Dollar Index (DXY) and BTC is a frequently watched indicator by traders when trying to estimate where the Bitcoin price will go. For many, the logic is that a weak DXY often coincides with a rally in the BTC price and vice versa. Last week, the DXY fell below 101, the lowest it has been this year, and as you can see in the chart below, the Bitcoin price has broken out of the $53,000 range.
Jamie Coutts, Chief Crypto Analyst at Real Vision, recently highlighted the DXY vs. BTC price action, saying:
“Unless something fundamentally changes, we are headed into what @RaoulGMI calls the banana zone, or what I would describe as Bitcoin crazy season.”
relevant: Bitcoin exchanges are experiencing the third-largest net daily outflows in 2024.
Powell finally revealed what crypto experts have been waiting for.
On August 23, Federal Reserve Chairman Jerome Powell said that it was finally time to cut rates, but did not specify how much. Many cryptocurrency traders have based much of their investment argument on the belief that a Fed rate cut will eventually lead to a return to previous quantitative easing policies, and that this money supply expansion will play a role in Bitcoin price discovery.
CryptoQuant analysts noted that immediately following Powell’s statement, the Bitcoin price rose more than 6%, sending “two-year Treasury yields to their lowest levels since March 2023.”
Market participants on Wall Street also have bullish expectations for stocks as the Fed confirms a rate cut.
Stocks are expected to rise for the first time in 30 years after the Fed cut rates. Wells Fargo $WFC“The strategy chief said.
— unusual_whales (@unusual_whales) August 27, 2024
As equilibrium was restored, demand for Bitcoin weakened.
Bitcoin’s mean reversion to $65,000 is supported by data from Glassnode, suggesting that BTC has returned to its “equilibrium” zone. According to Glassnode, the MVRV deviation band indicator is:
“(…) investor profitability has essentially reset to its equilibrium position, and the excitement and enthusiasm that followed the ETF launch has completely cooled.”
Bitcoin’s global yield indicator percentage has also “returned to its long-term mean,” reflecting the state of equilibrium within the BTC market.
Despite Bitcoin’s price soaring to $65,000, data shows weak investor demand for BTC, CryptoQuant notes:
“Bitcoin demand growth remains low and has even turned negative in recent weeks.”
Analysts detailed that Bitcoin demand has “slowed down significantly” since BTC was trading above $70,000 in April.
“Demand has declined from 496K Bitcoin, the highest 30-day increase since January 2021, to a current negative growth of 36K. As demand slows, the price has fallen from around $70K to a low of $49K.”
Glassnode analysts also observed a noticeable decrease in Bitcoin liquidations compared to the activity seen during BTC’s all-time high in March. Citing the ratio between Bitcoin price and net liquidation volatility, the analysts concluded that traders’ appetite for risk and leverage has diminished at the moment.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.