Bitcoin Price Analysis: BTC/USD Quietly Heading for Its Second Consecutive Monthly Gain
Since clawing back above $4,000 last week, bitcoin’s price has entered a stable trading pattern ahead of a key psychological resistance that, if breached, could pave the way for a sustained run to the north. Despite the lack of momentum observed lately, the largest cryptocurrency is quietly pacing toward its second consecutive monthly advance – a feat last achieved during the 2017 bull market.
Bitcoin Heading for Back-to-Back Monthly Gains
Bitcoin’s slow grind higher took a pause on Sunday, as futures trading continued to recede. BitMEX, the largest exchange-based market for bitcoin trades, saw its volume fall to $383 million, according to CoinMarketCap. That represents roughly 3.5% of the reported bitcoin volume across all virtual exchanges.
At last check, bitcoin was trading at $3,972 on Bitstamp, where it was virtually unchanged. The relative strength index (RSI), a key measure of momentum, continues to favor the bulls. Price action is also somewhat favorable, with bitcoin hovering just north of its 50-day moving average.
Aggregate data from CoinMarketCap show an average bitcoin price of $4,027.41. If the month were to end today, bitcoin would have gained 4.4% in March. The leading digital currency jumped nearly 12% in February to snap a six-month losing streak.
BTC/USD: Key Hurdles Remain
Back-to-back monthly gains would mark a significant departure from the brutal bear market that has engulfed bitcoin for the better part of 14 months. The bulls still face strong resistance in and around the December high, which is located between $4,200 and $4,300. Bitcoin failed to overcome this level twice in 2019 – first in early January and then again in the third week of February.
The slowdown in momentum has been accompanied by a broad cooling in price action over the past few weeks. This is further demonstrated by bitcoin’s 30-day volatility index, which tracks the extent of daily fluctuations in the asset’s price. The 30-day volatility gauge currently reads 2.32%, according to bitvol.info. That’s the highest since February 23, when bitcoin and the broader cryptocurrency market broke sharply higher.
Hacked’s coverage of bitcoin since the fall has revealed that prolonged periods of stability are usually followed by a steep drop in price. The most obvious example was in November, which marked the beginning of a 50% price collapse that was immediately followed by three months of stagnation. That being said, crypto strategist “Galaxy” recently explained via Twitter that more than 60% of ascending triangles with declining volumes end up turning higher. In light of this view, bitcoin should have a price target of $5,500 “once the breakout is confirmed.”
According to Bulkowski's study, more than 60% of ascending triangles with declining volume end up breaking upwards
with an average price rise of 35%
— Galaxy (@galaxyBTC) March 23, 2019
The $5,500 level is considered one of at least three major technical hurdles bitcoin must overcome to reverse the bear market. Beyond $4,200 and $5,500, the next major target is $6,800, which represents the 50-week moving average through February. Also read Has Bitcoin Bottomed? A Closer Look at the Bullish and Bearish Cases.
Long-Term Holders: It’s Time to Accumulate
If stories of rising institutional adoption and growing circulation are to be believed, then 2019 is shaping up to be bitcoin’s year of accumulation. For long-term holders, this could be one of the last times to cost-average bitcoin at an ultra-low price before a new rally begins. Continue reading: Crypto Adoption is Spreading Like Wildfire; Where is Bitcoin Headed?
There’s also evidence to suggest that retail traders are slowly getting back into the game after abandoning crypto for the better part of the year. Google searches for “bitcoin” rose sharply at the end of last year, likely as a result of the November selloff. Search activity remained elevated during the first quarter of 2019, according to Google Trends. Search trends are positively correlated with the amount of investor interest in bitcoin. Case in point: during the height of the bull market, “bitcoin” had a perfect trend score of 100.
A historical analysis of bitcoin reveals that the current bear market mirrors that of 2015, another period of accumulation that predated the 2017 price boom. This means the cryptocurrency is likely to be an attractive investment in the $2,000-$4,000 range.
Fundamental Stars Align
Although a repeat of 2017 is unlikely anytime soon, there’s strong reason to believe that market sentiment is slowly shifting in favor of the bulls. Bitcoin’s fundamental picture has improved in recent months as network fees plummeted and transactions surged. Last month, bitcoin transactions reached their highest levels in over a year, according to Diar. At the same time, median fees dropped to their lowest since 2015.
Advances in Lightning Network, bitcoin’s second-larger scaling solution, have also gathered pace in the last year. Data from 1ML show that Lightning Network has achieved 39,363 active channels with a total network capacity of 1,058.63 BTC. That’s equivalent to nearly $4.2 million at today’s prices.
It also appears very likely that Starbucks will roll out bitcoin payments over the next 18 months as part of the high-profile Bakkt initiative. Starbucks’ role in the consortium, which includes Microsoft and is backed by Intercontinental Exchange, could become the biggest driver of retail adoption.
“Interesting. But probably well worth it on the long term. The Starbucks angle was the most interesting thing about the Bakkt announcement. BTC needs more use cases and more retail adoption.” – Richard Johnson (March 2019).
The debate over bitcoin exchange-traded funds (ETFs) has also simmered down in recent months amid the wave of adoption happening elsewhere in the market. Institutional investors are already accessing bitcoin via futures and “private bilateral contracts.” According to Bloomberg, private bilateral contracts on bitcoin are valued anywhere between $125 million and $500 million every month. This private derivatives market has placed a great deal of emphasis on the $4,200 level. Read more: Bitcoin and Derivatives: Why $4,200 is So Critical.
Although bitcoin remains the largest and most influential cryptocurrency, its gravitational pull on other digital assets is waning. This “decoupling effect” is key for the long-term health of the cryptocurrency market as it means tokens and altcoins are being influenced more by fundamentals than by bitcoin.
On Sunday, bitcoin’s dominance rate fell to 50.5%, according to CoinMarketCap. Assets like Litecoin (LTC), EOS (EOS), Binance Coin (BNB) and some of the smaller caps have traded independently of bitcoin for the better part of 2019.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.