- Last month’s Bitcoin range formation remained in play.
- The on-chain statistics show that investors do not have to worry about a downward trend yet.
Bitcoin [BTC] saw a high degree of volatility on January 3 as prices fell 6.3% that day. Despite the selling pressure, on-chain metrics such as the Net Unrealized Profit/Loss (NUPL) suggested that the market is in a healthy bullish state.
AMBCrypto recently reported that Coinbase Premium was on the rise. Interest rates have been positive since September, with a brief dip into negative territory in mid-December.
This was a sign of steady buying pressure on Coinbase. It led to speculation about consistent buying activity from institutional investors ahead of the approval of a Bitcoin ETF.
AMBCrypto looked at other metrics to understand where BTC stands.
Assessing the available ammunition for the bulls
The Coinbase Premium Gap Since October, most of the time has been positive. In mid-December, the economy entered negative territory. Its inference has already been mentioned, but can be combined with other metrics to provide a sharper insight.
An example of such a metric is the Stablecoin Supply Ratio. It is defined as the market capitalization of BTC divided by the total market capitalization of all stablecoins. A low value for this statistic indicates high purchasing power.
The chart above shows that the ratio has peaked since early October. This meant that purchasing power fell. Strong demand for BTC, not just on Coinbase but across all exchanges, saw King Coin rise from $26,000 in October to $44,000 in December.
Over the past month, the statistic seemed to have reached a ceiling. This was a sign that market participants could watch and wait. The ETF applications and the debate over their approval and the impact on BTC prices could be causing this indecision.
The NUPL hit a high not seen since December 2021, but investors need not fear
On December 5, 2023, Bitcoin NUPL climbed above 0.5. The last time this happened was on December 27, 2021. This does not mean that a reversal is imminent. Instead, the market is not in a state of euphoria or despair.
The NUPL has plateaued over the past month. This is also related to the asset’s price action as BTC failed to continue its uptrend in recent months. An increase in BTC inflows on exchanges was part of the reason.
Over the past five days, there has been an increase in the Bitcoin Netflow’s 7-day Simple Moving Average. This meant that reserves on the exchanges increased even when BTC prices were above all-time highs. Therefore, the continued increase in this metric would be useful to monitor.
The same upward trend also occurred in mid-December. This caused Bitcoin to drop from $43k to $40.5k. Bitcoin’s range formation is also something that investors and traders should take into account.
Source: BTC/USDT on TradingView
The series (purple) has been in use since December 11. It rose from $40.5k to $44.3k. The January 2 breakout looked clean, and a retest of the highs would have been a good buying opportunity.
Instead, Bitcoin fell like a stone to $40.7k on January 3. Since then, the price has risen again to the $43.6k mark. The OBV has shown a gradual decline since December 11.
Read Bitcoin’s [BTC] Price forecast 2023-24
Attempts to revive an uptrend on the OBV have been aborted. This indicated a lack of purchasing volume. The RSI stood at 51, indicating a possible shift in momentum in favor of the sellers.
Therefore, BTC holders should be prepared for a drop to the lows and possibly much lower. The key levels to watch in the coming week are the mid-range at $42.5k and the recent highs at $45.9k.