Bitcoin (BTC) remains tethered below the $29,000 mark, lacking a new positive trigger to maintain the upward trend that led to a fresh annual high of around $31,800 earlier this month.
As of now, the cryptocurrency is holding above its 50-Day Moving Average, set at $29,100, in anticipation of the US Federal Reserve’s policy announcement on Wednesday.
Market participants predict a final rate increase of 25 basis points from the central bank, pushing the interest rates to 5.25-5.50%, their peak in 22 years.
While this projected rate hike isn’t likely to directly influence Bitcoin, the central bank’s stance on the potential for new interest rate increases could instigate some fluctuations.
The Fed has hinted at the possibility of another rate hike later in the year given the robust state of the labor market, but recent progress in mitigating the US inflation rate has somewhat alleviated the urgency for the bank to persist with the increases.
The widely held belief that the Fed’s tightening cycle is nearing its end is frequently cited as a significant factor contributing to the optimistic outlook for Bitcoin’s price. Traders will remember that the aggressive tightening measures implemented by the Fed last year to counter skyrocketing inflation significantly impacted Bitcoin’s price.
Other elements like growing institutional interest in Bitcoin, manifested by the recent surge of spot Bitcoin ETF applications from Wall Street giants like BlackRock, and Ripple’s (XRP issuer) partial legal triumph against the US Securities and Exchange Commission (SEC), are also considerable driving factors for a promising Bitcoin outlook.
However, the bright prospects for Bitcoin aren’t solely based on fundamental aspects.
Here are ten key technical and on-chain indicators suggesting that the bull market, which kicked off in 2023, continues to be robust and healthy.
Bitcoin is Back Above its 200DMA, Which Continues to Act as Strong Support
Historically, when Bitcoin manages to ascend above its 200-Day Moving Average after an extended period of falling below it, as it did in January, it often marks the onset of a new bull market cycle. This movement has traditionally been a strong long-term buy signal.
Bitcoin is Back Above its Realized Price
At roughly the same time when Bitcoin exceeded its 200-Day Moving Average, it also surpassed its Realized Price, which represents the average BTC price when each bitcoin last moved (this serves as an approximation for the average price investors paid for their Bitcoin).
The chart below from the crypto analytics service, Glassnode, illustrates how when Bitcoin manages to rebound above its Realized Price after an extended duration below it, this usually indicates the onset of a new bull market.
New Address Momentum Remains Positive
The 30-Day Simple Moving Average (SMA) of new Bitcoin address creation surpassed its 365-Day SMA last November, indicating an acceleration in the creation of new Bitcoin wallets. Historically, such a trend has been observed at or near the beginning of bull markets.
Revenue From Fees is Rising
A few weeks ago, Glassnode’s Revenue From Fees Multiple experienced a sharp increase, pushing its 2-year Z-score above 0, an indication of growing demand for block space.
The Z-score is a statistical measurement representing the number of standard deviations a data point is from the mean of a data set.
In this context, Glassnode’s Z-score represents the number of standard deviations above or below the average Bitcoin Fee Revenue over the past two years.
This rise above 0 in the Revenue From Fees Multiple’s 2-year Z-score usually takes place in the early stages of a bull market, indicating the start of a period of on-chain growth.
Market Profitability is Back
The 30-Day Simple Moving Average (SMA) of the Bitcoin Realized Profit-Loss Ratio (RPLR) indicator is above one and increasing.
This implies that a larger portion of profits (in USD terms) than losses is being realized in the Bitcoin market.
As per Glassnode, this usually indicates that “sellers suffering unrealized losses have been depleted, and a healthier inflow of demand is present to absorb any profit-taking activities.”
At the same time, the 30-day Simple Moving Average (SMA) of Bitcoin’s Adjusted Spent Output Profit Ratio (aSOPR) indicator, which measures the extent of realized profit and loss for all coins moved on-chain, is also above one.
This essentially signifies that, averaged over the past 30 days, the market is substantially profitable.
Historically, looking back over the past eight years of Bitcoin, the aSOPR indicator climbing above 1 after an extended period beneath it has proven to be an excellent buy signal.
Additionally, the 90-day Exponential Moving Average (EMA) of Bitcoin Supply in Profit has also been on an upward trajectory over the last 30 days.
The Supply in Profit refers to the number of Bitcoins that were last moved when the prices, in USD terms, were lower than they are currently. This suggests that these Bitcoins were purchased at a lower price, and the wallet is now holding a paper profit.
Glassnode states that “Macro shifts in the volume of Supply in Profit can indicate when a large concentration of investor cost basis has recently transitioned between unrealized profit or loss,” adding that “these shifts often occur around major market cycle changes.”
Bear Market Seller Exhaustion Reached
The subsequent two indicators pertain to whether the balance of USD wealth has adequately tilted back towards the HODLers, suggesting an exhaustion of weak-hand sellers.
Having hit a low at the end of last year, the Bitcoin Realized HODL Multiple has been on an upward trend for at least 90 days, a bullish indicator according to Glassnode.
The crypto analytics company asserts that “when the RHODL Multiple enters an upward trend over a 90-day period, it suggests a shift in USD-denominated wealth back towards new demand inflows.”
HODLER Confidence Remains High Despite Still Low Prices
After reaching an all-time low following the FTX collapse last November, an indicator of Bitcoin HODLer confidence known as “Reserve Risk” has been steadily recuperating, albeit still at historically low levels.
Glassnode explains that Reserve Risk is “used to gauge the confidence of long-term holders relative to the price of the native coin at any given point in time.” Reserve Risk is “a long-term cyclical oscillator that models the ratio between the current price (incentive to sell) and the conviction of long-term investors (opportunity cost of not selling).”
The conviction of long-term investors is captured in Glassnode’s “HODL Bank” index, which represents an accumulation of unspent “opportunity cost” accrued by HODLers the longer they resist selling. Thus, Reserve Risk is defined as the current Bitcoin market price divided by the HODL Bank index score.
Glassnode notes that when confidence is high and the BTC price is low (implying a low Reserve Risk score), the risk/reward ratio of investing in Bitcoin is appealing.
Therefore, this indicator is arguably conveying a strong buy signal.