Bitcoin Analysis BTC Plunges But Long-Term Outlook Remains Bullish

[ad_1]

Bitcoin Takeaway Last week’s big breakouts in Bitcoin and Ethereum are being tested with declines today. Bitcoin has at least 4 long-term bullish catalysts. Ethereum’s successful “Shapella” upgrade has reduced the risks of the staking process, potentially paving the way for a sharp reduction in ETH supply.

It’s been a whirlwind of a few weeks for major cryptoassets.

Between the “risk on” general trading and the successful upgrade of “Shapella” to Ethereum last week, Bitcoin and Ethereum both reached their highest levels since last summer, above $30,000 and $2,000 respectively. As traders began to get to grips with last week’s big breakouts, today sent a sell-off into the space, raising questions about whether the recent rally is legit or just a “fake breakout.” .

Bitcoin Analysis: Four Long-Term Bullish Catalysts

Looking first at the world’s largest cryptoasset, Bitcoin’s longer-term outlook remains bullish for 4 reasons:

First, Bitcoin recorded its biggest quarterly gain (+70%) in two years last quarter, signaling strong buying pressure after Q4 2022 washout below 18K.

Second, long-term holders used this time to accumulate the cryptocurrency, marking a classic shift from the “accumulation phase” of weak hands to strong hands. These so-called Risk Astleys (because they “will never let you down”, get it?) are now holding record amounts of Bitcoin at over 80% of the bumper supply. This offer is essentially exiting the market and setting the stage for the next bullish cycle.

Source: Glassnode

Third, with the next Bitcoin halving in about a year, we are entering a historically bullish period for the crypto market that could last for the next two years.

Finally, and arguably for the first time in its existence, Bitcoin has found a use case beyond trading. Similar to NFTs on other chains, “Inscriptions” or “Ordinals” now allow bitcoin enthusiasts to inscribe data on the Bitcoin blockchain. By increasing demand for block space beyond mere commercial demand, there is now more incentive to use blockchain, increasing its fees and security. As the chart below shows, daily Bitcoin transactions are occurring at levels historically seen only near euphoric price spikes:

Source: Glassnode

From a technical standpoint, Bitcoin is still holding above the previous resistance-turned-support at $28.6,000, despite today’s decline. While we wouldn’t be surprised to see today’s decline extend towards this level, longer-term accumulators may look to intervene before we see too steep a decline given the rising EMA at 50 and 200 days.

Source: TradingView, StoneX. This product may not be available in all regions.

Ethereum Analysis: Smooth “Shapella” Could Lead to Lower Long-Term Supply

Compared to its big brother, Ethereum’s longer-term outlook is potentially even more optimistic. As last week’s ‘Shapella’ upgrade approached, many analysts expected waves of selling to hit the world’s second-largest cryptoasset as stakers supporting the network could finally sell their previously locked ETH.

While logical, there is at least one major problem with this theory so far: stakers don’t sell in droves. In fact, net staking redemptions only lasted a few days and since the start of this week, ETH holders have increased net staking activity:

Source: Nansen

In a way this makes sense as it is now objectively less risky to stake Ethereum as it is now relatively easy to withdraw their funds if needed (i.e. staking ETH now less liquidity risk than there was at the beginning of last week). As the chart below shows, Ethereum is performing well below other “proof-of-stake” chains in the percentage of its supply that is staked, and if that resumes in the coming weeks, it will provide a steady reduction in value. supply which could additional support price:

Source: StakingRewards

As for the near-term price action, ETH/USD is testing its previous breakout level at 2000, and a break below could indicate a deeper retracement. Even if we see this decline in the short term, the aforementioned “tokenomics” for the Ethereum ecosystem should attract buyers and put a floor under the price, with initial support near $1800, where the 50-day EMA coincides with a key level of previous resistance.

Source: TradingView, StoneX. This product may not be available in all regions.

— Written by Matt Weller, Global Head of Research

Follow Matt on Twitter @MWellerFX

[ad_2]