Bitcoin: BTC action analysis for 7 days and predict for next action
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Bitcoin (BTC) has just ended another week supported by low volatility and limited range on the price chart. However, traders and investors waiting for BTC volatility to return can still have some hope, thanks to the following observation.
A recent CryptQuant observation by an analyst who goes by the pseudonym Kriptolik points to a potentially bearish scenario. According to the analysis, Bitcoin reserves in the derivatives market are higher than spot reserves.
Higher demand in the derivatives market than in the spot market is common in bear markets. It also highlights highly leveraged trading as traders try to increase their potential profits. However, this often leads to liquidation, especially in unfavorable market conditions.
BTC will the bears prevail?
Trades that are highly leveraged relative to spot activity present a potential risk of liquidation, especially if the price falls further. Looking at Bitcoin's ongoing price action seems to suggest such an outcome is very likely.
If we step back and look at BTC's price action since June, we see that it has been trading inside a wedge. What's even more interesting is that the same wedge pattern is currently squeezing the price into a tight zone. This could explain why the price has been trading in a tight range for the past few weeks.
Bitcoin's current position in the wedge suggests that it will soon break out of the pattern. While it is likely that it will continue to trade sideways, the probability of a breakout or breakout is significantly higher. This is because the compression zone itself often creates an expectation that a big move is about to happen.
As far as on-chain metrics are concerned, the percentage of whales trading BTC has increased slightly over the past 3 days. This is important because this ratio tells us whether there is high or low whale activity on exchanges. A low ratio indicates low whale activity and vice versa. In this case, the increased exchange rate of whales confirms that some whale activity has returned this week.
Now that some whale activity has returned, the outcome of the increase or decrease will depend on whether they buy or not. The Miners Position Index has stabilized and recorded a slight increase over the past 3 days. This means that miners are sending out coins and this could be an indicator of upcoming selling pressure. The same indicator remains close to its monthly low range. So it's not exactly an exact representation.
Whale address balances are better suited to providing a visual picture of current demand. Addresses holding more than 100 BTC have dropped significantly over the past 3-5 days.
Here, it's also worth considering that the Purpose Bitcoin ETF Holdings, one of the leading institutional indexes, remains near the lower range.
The lack of organization or accumulation of whales confirms that BTC is experiencing low buying pressure. In fact, recent breakouts could be a sign that BTC is more likely to break below support.
Oct 24, 2022