Bitcoin and Altcoins Report – April Week 2. At the Wall Street open on April 10, Bitcoin is still trading but many are placing bets on an imminent breakout. With the current spike that produced the highest weekly closing of BTC/USD since June 2022, there is new hope that Bitcoin could soon cross the $30,000 threshold. This week, let’s examine the state of the Bitcoin and altcoin markets.
A Volatile Week Ahead!
The first week of April 2023 has seen a fair amount of stability for both Bitcoin and altcoins throughout the last week. Bitcoin and Altcoins The SushiSwap breach, however, highlighted the industry’s propensity for hacks and exploits and brought some drama to the cryptocurrency market.
It looks like an exciting second week of April, with an especially busy Wednesday when Ethereum finishes its Shapella upgrade, enabling validators to unstack ETH.
In addition, it aligns with the release of the March CPI as well as the Fed’s March meeting minutes. Bitcoin and Altcoins Furthermore, some of the futures contracts offered by the Chicago Mercantile Exchange (CME) will switch to a new interest rate on Friday.
The Aftermath?
It’s unclear how ETH unstaking will affect ETH itself and the cryptocurrency market. A plausible consequence of the successful execution of the Shapella update could be an increase in institutional investor trust in ETH, leading to a rise in ETH value and increased buying.
Nonetheless, unstacked ETH may also exert strong sell pressure, which might cause ETH’s value to drop precipitously. In actuality, the early sell pressure may be worth more than $2 billion.
Furthermore, there’s a chance that following the upgrade, the SEC will view ETH as a security. Because ETH is “sufficiently decentralized,” former SEC director Bill Hinman previously declared that it is not a security. However, this decision was made while ETH was still a proof-of-work asset.
In theory, it is still a proof-of-work asset, but once unstaking is permitted, this could alter. It’s also important to remember that SEC Chairman Gary Gensler has declared that cryptocurrencies with proof-of-stake are securities. Therefore, there’s a chance that the SEC would reclassify ETH as a security, which might have a big impact on the cryptocurrency market.
What About the CPI?
Because it appears to be stuck at somewhat over 5%, the core CPI number—rather than only the headline number—will be pivotal in determining the March CPI print. Bitcoin and Altcoins If either the headline or core CPI remains unchanged or unexpectedly rises, a crash may occur. Another scenario where a rally could happen is if the headline or core CPI unexpectedly drops.
In any case, the March meeting minutes will show if the Fed is worried about financial stability or if inflation is still the main concern. The fact that the gathering took place only days before the start of the financial crisis gives it added significance.
The minutes could have a positive impact on the market if they show that authorities are getting more and more worried about the stability of the economy. In contrast, the market could be negatively affected if inflation continues to be the dominant emphasis.
Lastly, keep an eye on the interest rate flip that the CME is implementing. Friday marks the beginning of the changeover from the LIBOR rate to the SOFR rate for futures contracts on the CME, the biggest futures market in the world.
According to Fitch Ratings in 2021, this shift has the potential to trigger market volatility; according to recent articles in the Financial Times, this danger persists. Bitcoin and Altcoins A black swan occurrence is something to be concerned about, but we can only hope that this shift won’t cause one.
Rising Volatility in the Price of Bitcoin
Kaiko, a market data site, predicts that traders seeking volatility will find it in plenty. As trading activity on Bitcoin rises while the Nasdaq falls, the two markets’ volatility is diverging. The U.S. banking crisis events this month caused the difference between Bitcoin and Nasdaq 30-day rolling volatility to grow, hitting levels not seen in a year. In the first week of April, Kaiko announced that the correlation between Bitcoin and gold was higher than that between Bitcoin and the S&P 500. A bigger chasm now separates them!
The inverse correlation between Bitcoin and the US dollar is quickly unraveling, according to the market data source. Although the negative connection between BTC and the US dollar has decreased from -60% to -23% year-to-date, it is now nearly insignificant. According to these findings, Bitcoin is becoming less involved with conventional markets and is instead playing the role of a safe-haven asset.
Bull Run: A Long Way Off?
Whether or not Bitcoin’s price needs to keep going up is dependent on how short-term holders act and how much money they make when prices drop. One useful technique to understand how Bitcoin holders behave is to look at their value relative to the realized price. Conversely, those who retain their coins for the long haul are willing to take a bigger hit in the event of a loss.
When short-term holders start making money, it usually means that Bitcoin is about to have a good day. They are less likely to sell their coins as they grow richer and have more incentive to hold on to them. Therefore, short-term holders are worth more right now.
When the realized price of the 1-6 months age band is higher than the 6-12 months age band, it means that new Bitcoin investors are making more money. This metric was provided by the Bitcoin Foundation. According to the price cycles of Bitcoin in 2015–2016 and 2018–2019, a bull run often starts after this change happens after a price correction.
But things are different now, and it could take more time to do this. To make short-term holders’ wallets fatter, get them to think long-term, and stop sell-offs in their tracks, we need more new investors. The process of the Bitcoin bull run could be prolonged if short-term holders become long-term holders.
Is 100K BTC Possible?
Bitcoin has grown by over 69% year-to-date in 2023, demonstrating remarkable gains. Interestingly, the correlation between $BTC and the technology-focused Nasdaq 100 index has declined dramatically, from 0.75 in October to 0.3 today, indicating a weakening of their relationship.
We can evaluate Bitcoin’s market activity using multi-year cycles that include accumulation (turquoise) and distribution (purple) phases. Smart money (institutions) favors accumulation cycles, whereas retail demand is more typical of distribution cycles.
Furthermore, halving events, preceded by accumulation cycles (turquoise), are critical stages of the Bitcoin cycles. Fees to reward on-chain data (yellow) frequently surge before the start of a distribution cycle. Bitcoin and AltcoinsThis phenomenon occurred in 2019 and 2020 and can be used to forecast the change from an accumulation to a distribution cycle.
During the 2019 accumulation cycle, the fees-to-reward ratio peaked before the summer relief rally (white arrow on the left), reaching 0.12. In 2020, the fees-to-reward ratio rose again, hitting 0.21 in May and 0.29 in November.
Furthermore, the fees-to-reward indication appears to be increasing again (white arrow on the right). Furthermore, Bitcoin is approaching a previously anticipated price model based on 2019 data, which projects a spot price of $46,092.
According to the estimate, Bitcoin should reach its target by the summer of 2023. However, the true aim is the 2024 halving event, which signifies a paradigm shift in the sequence of Bitcoin market cycles.
The next halving event will most likely take place on April 29th, 2024, and will improve Bitcoin scarcity by cutting the block reward from 6.25 to 3.125. After attaining the 2019 target price of $46,092, Bitcoin may reach $100,000 following the 2024 halving event.
MVRV Ratio and Insights
The Bitcoin MVRV ratio is a useful tool for monitoring market movements since it compares the current market capitalization to the cryptocurrency’s realized capitalization. This statistic has proven to be a reliable predictor of market behavior over three halvings.
One important application of the MVRV ratio is identifying market patterns. When market capitalization grows faster than realized capitalization, the MVRV ratio rises, possibly indicating a larger likelihood of sell-offs. When realized capitalization exceeds market capitalization, the MVRV ratio falls, indicating a potential decrease in selling pressure.
Following the COVID issue, Bitcoin’s MVRV turned green in April 2020, indicating values of more than one, and proceeded to rise, hitting an all-time high of more than 3.75, representing Bitcoin’s ATH.
However, after China’s embargo, the MVRV fell to 1.5 before recovering and reaching a lower high of 3. Then, MVRV began to fall and eventually breached the 1.5 mark due to bad storylines surrounding big crypto corporations including Terra Luna, Three Arrows Capital, Celsius Network, and FTX.
In November 2022, the MVRV ratio fell below 1, reaching a low of 0.75. However, in January 2023, Bitcoin values skyrocketed due to a huge buildup in both the spot and derivatives markets. This increase was aided by a record-breaking amount of open positions in Bitcoin options, signaling a continuous growth trend, and the MVRV ratio soon broke the 1 level higher.
Analysis of the MVRV ratio highlights the significance of the 1.5 level, raising the question of whether the ratio will exceed this level to continue its rising trajectory. This scenario is quite likely, since customers rapidly withdraw Bitcoin from exchanges, resulting in a limited quantity.
Insights From Exchange Bitcoin Inflow and Outflow
Let’s first learn correlation analysis before analyzing Bitcoin influx and outflow. Statistics determine the direction and degree of a relationship between two variables using correlation analysis. Positive correlations occur when two variables move in . Bitcoin and Altcoins The same direction, while negative correlations occur when they move in opposite ways.
A 0.93 correlation value suggests a high positive association between Bitcoin exchange inflows and outflows. As inflows rise, so do outflows. The strong correlation coefficient shows that these two measurements are tightly related, so we . Can predict changes in one variable by looking at changes in the other.
When Bitcoin inflows to exchanges increase, short-term holders may sell. Their bitcoins at high prices to make gains, lowering prices and raising their Realized Price.
However, a significant spike in Bitcoin outflows from exchanges, usually following a jump in BTC inflows as shown by. The correlation graph may suggest a growing interest in holding the asset outside of exchanges, likely by long-term holders. The Realized Price of long-term Holders may decline due to this tendency.
Moving Bitcoin’s price from $27,500-$27,800 to above $28,000 may indicate. Long-term holders have taken advantage of the price drop and withdrew their bitcoins from exchanges. This withdrawal of Bitcoin from exchanges limits supply, which may increase demand and price.
However, if Bitcoin dips below $28,000, short-term holders may have sold their coins at $28,500–$28,500, increasing exchange supply. This increase in supply may lower prices by decreasing demand.
Whales and Fund Flow
The money flow reveals the activity of investors on exchanges by comparing. The total number of coin transfers to the proportion of transfers via exchanges. The flow of cash in and out of the market has created a pattern where . The price of Bitcoin suffers and then recovers.
One probable explanation for the current pattern could be that whales have decided to initiate a surge in money flows. They are actively trading on exchanges to establish a market bottom. Bitcoin and Altcoins Institutional buyers and other OTC market participants saw this as a sign that. The market had hit rock bottom, which boosted demand.
If these whales were able to persuade over-the-counter institutions to purchase. The market would likely continue its upward trend while fund flows would sharply drop.