Technology

Where is the bitcoin price headed? Analysts consider these scenarios

Key facts:
  • Confidence of BTC breaking above $40,000 is dwindling among traders.

  • However, some analysts suggest that a rally to the upside is soon to come.

After registering five successive weeks in decline, the price of bitcoin registers a slight rebound this Monday, May 3, after touching USD 37,500 per unit over the weekend. Regarding the prospects for price developments, there are different views among the major analytical firms. While for Santiment there would be signs that would prevent the bitcoin price from exceeding USD 40,000 again, there is data on-chain of the company Glassnode that indicate an upward trend in the medium term.

Other analysts, such as the case of the Ecoinometrics firm, point out that the price could cross a line that has served as historical support for the cryptocurrency market. In this wayBTC could drop below $30,000if the data of the analysts is correct.

Is BTC trader mistrust increasing?

Of the bitcoin sales transactions, the analytical firm Santiment monitors how many are in profit and how many are in loss. This Sunday the first of May, public on Twitter the graph that records the relationship between both data. In the first two hours of trading this Monday (UTC), gaining trades outnumbered losing trades by a factor of 12.5. This result is unusually high, since since the beginning of the year the maximum value recorded was 2.8.

“Trader confidence in BTC reclaiming the $40,000 mark appears to be very small,” notes Santiment. Namelythe prevailing sentiment in the market is bearish.

Bitcoin has recorded a massive amount of profitable transactions at the beginning of May. Source: Santiment.

The graph displays the ratio of transactions in profit versus transactions in loss for ETH (pink) and for BTC (blue), along with the price of BTC (green). As seen, profit-taking by traders intensified, at that time of day.

Ecoinometrics raises bearish hypothesis

For its part, the analytical company Ecoinometrics states that it could break one of the historical trends of bitcoin support, represented by the curve of the 200-week moving average (200W MA). Which could mean the start of a downtrend, as has happened on other occasions.

bitcoin price history combined with 200 moving average
The price of bitcoin and the moving average of 200 weeks. Source: Ecoinometrics.

Several times in 2015, late 2018, and mid-March 2020, the price curve touched the 200-week moving average and established a low at those touchpoints. Since its all-time high on November 8, 2021, the BTC price has been falling and the 200W MA curve is on the rise, according to Ecoinometrics.

The distance between the price of Bitcoin and the 200-week moving average has steadily decreased in the last two weeks, notes Ecoinometrics. The 200W-MA is considered key to the price trend of Bitcoin, and a move below would be considered a very bearish signal for the currency, according to Ecoinometrics.

If such a cross occurs, Ecoinometrics estimates that the price could drop to USD 30,000, or even below this mark. A behavior that the Bitcoin market has not had since the beginning of the current year.

Bitcoin network data is encouraging

Despite the dim forecasts, the bitcoin price downtrend does not fit with some of the main on-chain parameters, which remain at healthy and auspicious levels for a rally bullish.

For example, BTC inventories on exchanges continue to decline, which leads to what is called a supply shock. This situation corresponds to a lower availability of BTC in the market, which could lead to a price increase if the demand grows.

In the chart below, you can see that the percentage of the bitcoin supply that is on exchanges has consistently declined so far this year. From 13.93% of the supply on January 1, BTC on exchanges went to 12.89% of the supply on April 30.

This implies that Approximately 134,000 BTC have left exchanges in four months to holders’ cold wallets, who do not seem to be willing to sell at the moment and could be waiting for a future rise.

graph shows exit of bitcoin from exchanges
Some 134,000 BTC have flown out since January 1 from exchanges. Source: Glassnode.

Another indicator that can be associated with a potentially bullish trend, is the growth of BTC held by large holders. For example, addresses with a balance greater than 1,000 BTC, associated with the so-called bitcoin whales, have grown significantly since the end of February. This could indicate that institutions and major holders are buying, suggesting that they are preparing for a long-term rally where they will capitalize on their investments.

increasing addresses with more than 1000 bitcoins
The growth of addresses with more than 1,000 BTC is a factor considered bullish.

It is convenient to keep in mind that the number of addresses represented in the graph does not only include whales, which control addresses with a balance of between 1,000 BTC and 10,000 BTC. There are also those with a balance greater than 10,000 BTC, the bitcoin mega-millionaires, as well as addresses that belong to institutional investors or those controlled by exchanges.

In conclusion, the accumulation continues amid the moderate downtrend that the price of BTC is going through, which forms a bullish divergence scenario for bitcoin. Prior to last Monday’s rally, a floor near $38,000 appears to have been established, although demand has not been strong enough to break through the $40,000 resistance.

Another factor that could potentially be favorable to a possible bitcoin price rally is based on the historical performance of bitcoin in the month of May. Since 2011, according to bitcoinmonthlyreturn.com, the month of May has shown positive returns seven times and losses four times. A phenomenon that raises hopes among bitcoin traders who hope to see an upward movement consolidated.

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