Bitcoin (BTC) price is trading 7% lower than the local high of $66,508 reached on September 27, but some analysts believe this correction could be a reset for key indicators as BTC prepares for a massive rally in the fourth quarter of 2024. I’m optimistic that it can happen.
“Bitcoin is near all-time highs, but valuation metrics are all down from extreme overbought in March to around 17-75% on a 4-year Z-score,” said Jamie Coutts, senior cryptocurrency analyst at Real Vision. X’s post from October 1st
Coutts mentioned an on-chain metric called the market-to-realized value (MVRV) Z-score, which shows the relative position of market value to realized value. This was -116% over 3 months and -94% over 2 months. Over a one-year period, it is -107%. This suggests that Bitcoin has been grossly undervalued over multiple periods of time.
The analyst also explained that Bitcoin’s open interest (OI) is high, which is a key indicator used by investors to assess market sentiment and predict future price movements. Perpetual futures OI is up 800% over the past four years.
“Open interest is high in nominal and relative terms, but funding rates are low.”
Bitcoin network basics. Source: Jamie Coutts
Coutts also pointed out that “global liquidity is accelerating the uptrend,” adding that the decline witnessed over the past six months has “removed excess strength” from the market and positioned and created the reset needed for a “major rally.”
According to a report by independent analyst Lyn Alden, Bitcoin price has historically been correlated with global liquidity, with the value of BTC typically rising when liquidity expands and adjusting when global liquidity decreases.
The chart below shows that Bitcoin price has a correlation of 0.94 with global liquidity from May 2013 to July 2024, indicating a very strong positive relationship.
Comparison of BTC price and global M2 money supply. Source: Lynn Alden
This suggests that an increase in global liquidity could be a prerequisite for a similar surge in the price of Bitcoin.
relevant: 3 Signs Bitcoin’s Q3 Close Is Bullish
How much can Bitcoin rise in the 4th quarter?
Additional data from CoinGlass shows Bitcoin had its greenest September ever, closing 7.29% higher on September 30. This has led to speculation among traders and analysts about how Bitcoin will perform during the fourth quarter of 2024. Bitcoin halving year and US election year.
Bitcoin analyst Timothy Peterson said in a recent analysis for
Peterson attributes this weakness to increased uncertainty surrounding the election results, which has led to market volatility and more cautious behavior among investors. Bitcoin reacts sharply to this uncertainty, resulting in muted or negative returns.
Peterson explained, however, that the price of Bitcoin could record more gains in November and December as investors get a clearer picture of the impact of the political outcome.
“Once the election results are known and the market has a clearer picture of the political situation, investor confidence typically returns and the focus shifts back to broader economic and market conditions, driving Bitcoin prices across election and non-election years. Fluctuations can become normalized.”
Bitcoin performance in October. source: Timothy Peterson
Meanwhile, fellow analyst Archie, founder of BTC Archive, believes that after recording a green September, Bitcoin could continue to gain momentum during the final quarter of 2024, setting a six-figure target for BTC by the end of the year.
Bitcoin price target for the fourth quarter of 2024. source: arch
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.