Bitcoin has risen 70% in the past four weeks, topping the $50,000 mark for the first time in three months. While the ascent appears to have revived the broader bullish bias, further gains toward record highs may be slow to come, blockchain metrics and chart factors indicate.
Pickup in exchange inflows
Data tracked by Glassnode show crypto exchanges received 16,606.80 BTC on Monday, the highest daily net inflow in over a month. Over the past week more than 29,000 BTC have been moved to exchanges. "[It's] not a trend we want to see continue," William Clemente, lead insights analyst at Blockware Solutions, tweeted.
Investors typically move coins from their wallets to exchanges when they plan to sell. Assuming demand-side pressures remain unchanged, the increase in the exchange balance may put the brakes on the price rally, if only temporarily.
The exchange balance declined by more than 100,000 BTC in the three weeks ended Aug. 19, reflecting a largely bullish market sentiment. Bitcoin bottomed out at about $30,000 and recovered to $45,000 during that period.
Whale accumulation halts
Whales, or large investors with an ability to make or break market trends, who accumulated coins after the mid-May price crash, have begun running down their inventory.
The supply held by entities with a balance of 1,000 BTC to 10,000 BTC has declined by nearly 75,000 BTC over the past three weeks, diverging from the rising price.
Entities refer to clusters of addresses held by a single network participant. These large investors began accumulating coins after bitcoin's slide to $30,000 in mid-May, signaling a price bottom. Bitcoin held on to the support in subsequent weeks and bounced this month.
The recent price action also reflects weakening on the buy side. "The failure to close the day above $50,000 shows some weakness in demand," QCP Capital noted in its Telegram channel. Bitcoin printed a high of $50,496 on Monday, but closed the day (UTC) below $50,000. At press time, the cryptocurrency was changing hands at about $49,400.
QCP Capital doesn't foresee exponential upside breakouts like those at the end of 2020. The firm also mentioned the continued calmness in implied volatility, or investors' expectation for price turbulence, and the Grayscale Bitcoin Trust discount as reasons for moderation in the bullish outlook.
The annualized one-month implied volatility is hovering near the recent low of 82%, even though bitcoin rose above $50,000 on Monday. Meanwhile, GBTC shares traded at a discount of 14% to their net asset value on Monday, according to data provided by Skew. "As a proxy for U.S. interest, GBTC should at least trade at par if we are to expect any strong follow-through in spot," QCP Capital said.
"The clear trade for us here is short vols [sell call/put options] as we expect the spot to be sticky around the $48,000-$51,000 level," the firm added. (Grayscale and CoinDesk are both owned by Digital Currency Group.)
The 14-day relative strength index (RSI) is now sidelined and not showing a clear directional bias. "A consolidation triangle in the RSI also reflects the hesitancy in the market despite the positive price action," QCP Capital said.
"Bitcoin is coming into resistance at a 61.8% Fibonacci retracement level near $51,000, which would be a natural place for a short-term pause in the rally," Katie Stockton, founder and managing partner of Fairlead Strategies, said in the weekly research note.
Stockton, however, added that the long-term momentum has strengthened, with the 200-day moving average (MA) rising again. As such, the cryptocurrency would eventually topple resistance at $51,110.
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