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BTC – Whales stepping into the market

There has been no real significant change in the technical structure of BTC since the last report. BTC is still trading inside the rising channel structure which is providing us bulls with some hope of a continuation to the upside. However, there are a number of fundamental risks that you should be aware of.

Bitcoin Fundamental & Technical Report

From a global economic perspective, risk assets have had a tough week with US equities down across the board due to covid-19 variant concerns and FED taper talk. The FED is slowly beginning to withdraw monetary support (quantitative easing) due to escalating global inflation. We have previously talked about how BTC has been used as an inflation hedge, the fact that the FED is attempting to combat inflation could be putting some downside pressure on BTC in the short term. A decrease in money supply directly impacts risk assets such as the stock market and cryptocurrencies.

However, the recent correction is currently the least severe in 2021 and many investors are assuming it is business as usual. Interestingly, BTC has not reacted as violently to the downside as the equity market which is throwing a taper tantrum.

At the institutional level, pension funds, insurance companies and large institutional investors are slowly beginning to dip their toes in the cryptocurrency space. For example, the Houston Firefighters Relief and Retirement fund made its first investment into BTC and ETH. The pension invested 0.5% of its $5.2 billion portfolio – roughly $26 million USD. Although this is a small investment in the grand scheme of things, it is highlighting confidence in the cryptocurrency market is growing.

BTC Tokens Transferred Mean

The chart above shows the average size of the BTC tokens being transferred. If you cast your eyes back to the 2017 bull run, there was a number of large spikes in the size of the tokens being transferred leading into the parabolic rally. This indicated whale investors entering the market. Over recent weeks/months we are seeing a very similar action which is indicating larger investors are potentially entering the market on the recent dips. Potential signs of large whale activity

Naturally, the BTC mining network difficulty has increased over the past couple of months. However, 8 months since the China mining ban and the overall network hashrate and network difficulty are still below the previous peak. This provides a prolonged period of increased mining rewards. As you will be aware, gradually over time the network difficulty will increase as new hardware comes online. Mining conditions are still very much favourable to those who have access to cheap power.

Bitcoin Technical Analysis

Chart courtesy of lookintobitcoin. The long term Bitcoin investor can monitor the monthly colour changes. Historically, when we see orange and red dots assigned to the price chart, this has been a good time to sell Bitcoin as the market overheats. Periods, where the price dots are purple and close to the 200 week MA, have historically been good times to buy. Currently, BTC is in the middle of no mans land and we are yet to see the typical parabolic rally with the red heat dots which generally occurs at the peak of a BTC bull run. With the blue dots on the current price action, it indicates the market is “cool”. 

Looking at BTC from a technical perspective no key structures have been broken to the downside, so the bulls are still in control. The major level you should be aware of is the $54,000 support, which is also the rising trendline support. A breakdown from here would indicate a more severe correction is in play and could open the doors for a move towards $40k. However, taking a look at the MACD on the daily time frame there is potentially a cross over taking place which is the early sign a bottom is approaching. 

 

To break things down, long term the team is very much in the bullish camp, however, there are a number of headwinds that could provide some short term volatility. Mainly the FED taper plans and covid concerns. What we do know is BTC is here to stay and we will continue our long term HODL!

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