- The movement of dormant coins is yet another bullish argument for BTC.
- Bitcoin could consolidate this weekend, but a breakout could happen as early as October 30.
Trading the crypto market can be complicated, and for a volatile asset like Bitcoin [BTC]It’s not always a straight path to profits, nor does a downtrend confirm that it’s time to go short.
Read Bitcoins [BTC] Price prediction 2023-2024
To clear your confusion, a short refers to a trading strategy that speculates on the decline of an asset. So when a trader opens a short position and the value of the cryptocurrency in question drops, the trader tends to make a profit. The opposite of this is a long where the opened position is aimed at a price increase.
Possible stops between the ascent
Lately, Bitcoin has especially favored long-positioned traders. This is due to the impressive rise of the currency in recent weeks. Confidence in the market is therefore high. At the same time, there also seems to be greed. But here it is most important.
Bitcoin’s rebound has many traders wondering whether the currency’s value will continue to defy expectations and rise, or if it’s time for a correction. Naturally, technical and/or on-chain analysis provides insight into the price action.
However, current conditions are supported by a number of macroeconomic factors. So, dependence on the above-mentioned models can only leave a sour taste in a trader’s mouth.
Typically, a long period of upswing leads to a period of consolidation or decline. For context, consolidation happens when a coin like BTC floats around prices very close to each other, without significant direction.
From an on-chain perspective, Santiment, an analytics platform in that regard, said traders have nothing to worry about. According to the post on X (formerly Twitter), there has been an increase in the movement of dormant coins.
👍 If you are concerned about a #crypto looking back, pay attention #Bitcoin still maintains a high pace of active addresses. Furthermore, the asset with the highest market capitalization is now seeing a high level of dormant tokens in motion, typically synonymous with #bullish conditions. https://t.co/bvjDL2Shga pic.twitter.com/NvxKkQpkg8
— Santiment (@santimentfeed) October 26, 2023
Dormant coins are assets that have been stored for a long time and are stagnant in the wallet they are in. Santiment noted that the increase in migration alongside the rapid pace of active addresses means that BTC is still in pole position for continued increases. .
Active addresses are the number of unique addresses performing transactions on a network. When the benchmark rises, it means there is a wave of speculation.
On the other hand, a decrease indicates a decrease in interaction with the cryptocurrency under discussion. Therefore, the active addresses here mean that many addresses are conducting Bitcoin transactions.
For the time being, a downward trend is plausible
Besides these two factors, there are other reasons why BTC may not experience a significant decline. At the same time, that does not mean that the collection would continue without a decline. One story that played an important role in the interest rate increase is the optimism surrounding ETF applications that are on the table at the US SEC.
While there is no confirmation on the approval period, many market players believe that one of the many approvals will soon receive regulatory approval. Alex Adler Jr, a verified author at CryptoQuant, noted that BTC may continue to consolidate.
Adler’s view came from the position represented by the futures dynamics index. BTC’s dynamic futures index provides insight into traders’ bullish or bearish sentiment.
In 48 hours, the market still has to decide which direction it will move. Currently there is a slight tendency towards short positions.
The best-case scenario would be for the market to remain flat, with activity declining over the weekend and then consolidating with a breakout on Monday. pic.twitter.com/qh7gE2Mel3
— Axel 💎🙌 Adler Jr (@AxelAdlerJr) October 27, 2023
As of Adler’s post, most traders’ positions were leaning toward the short side. The analyst also said there could be a drop in activity over the weekend. So if an outbreak has to happen, it can wait until October 30th.
On-chain data from Santiment also showed that BTC could continue to consolidate. This statement is derived from the seven-day circulation. At the time of writing, Bitcoin circulation was 416,000. This metric is the number of coins used in transactions within a certain time frame.
Moreover, the value has been virtually the same since October 26. So there is no significant sign of selling pressure. As a trader the indication is by the circulation is to continue to monitor the market. This is because it is highly unlikely that Bitcoin will choose a specific direction in which to move for the time being.
Source: Santiment
New entry points loom
From a technical point of view, the BTC/USD chart showed that the purchasing power of the currency has decreased. At the time of writing, the Relative Strength Index (RSI) stood at 62.61. Previously, the RSI value reached 90.86.
This means that BTC was overbought at that time. So it was inevitable that the indicator would repeat itself, just like the Bitcoin price.
This was one of the factors that led to the drop below $35,000. However, the current state of the RSI does not mean that buyers are exhausted. So any significant buying momentum could cause an increase direction $36,000.
It may therefore be good to pay attention to the period in which the RSI moves towards 65.00. If this happens, it could be a good entry point to long BTC. For now, short positions may be able to make more profits than short positions that expected upward movement.
Source: TradingView
This conclusion was based on the Moving Average Convergence Divergence (MACD). At the time of writing, the MACD stood at -2.14.94. The negative value of the indicator means that there are more sales orders than purchases. So the coin price would most likely fall (however negligibly) rather than rise.
Looking at the long term?
However, if you want to potentially benefit from Bitcoin as a trader in the medium to long term, the reserve risk can give you an idea of which side to choose. Bitcoin reserve risk is used to assess the confidence of long-term holders towards the price action.
Is your portfolio green? Check the BTC profit calculator
When the benchmark is high, it means that confidence in the market is low and the price is high. Conversely, low reserve risk means confidence is high and price is low. At the time of writing, the risk of the reserve was 0.001, indicating high confidence in the market and an undervalued Bitcoin.
Source: Glassnode