The central theses
- Bitcoin’s aSOPR indicator has been reset and is providing a bullish signal.
- However, the cryptocurrency is also facing strong resistance that could keep rising prices in check.
- Just a 4-hour candlestick that is outside the $ 31,000- $ 33,500 range will determine where Bitcoin is headed next.
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Bitcoin remains inactive after a period of high volatility. While some on-chain metrics are gradually turning bullish, the technical data suggests further consolidation.
Bitcoin presents ambiguous outlook
With Bitcoin’s impressive bull run to a new all-time high of $ 42,000 on January 8, the Adjusted Spent Output Profit Ratio (aSOPR) indicator rose to a value of 1.28. The behavior in this on-chain metric indicated that BTC’s uptrend was exhausted.
Next came a 31.60% pullback that pushed Bitcoin’s market value below $ 29,000.
According to Glassnode, Bitcoin’s downward movement helped the aSOPR reset for the first time since mid-December 2020, indicating that the most recent correction period has expired.
“Bitcoin’s aSOPR has been reset … [meaning] that coins that move between investors per hour (24 hours MA) are on average no longer sold for a profit, ”suggests Glassnode. “For the SOPR to fall, investors would have to be prepared to sell at a loss, which is unlikely given the current market shape.”
Even so, Bitcoin continues to consolidate in a descending triangle on the 4-hour chart.
From a technical standpoint, the recent resetting of the aSOPR index may help Bitcoin bounce back from the x-axis of the triangle onto the hypotenuse at $ 33,500. However, due to the substantial resistance, a rejection may emerge, pushing BTC back to the support level of USD 31,000.
The thesis for further consolidation applies to the IOMAP model (In / Out of the Money Around Price) from IntoTheBlock.
Based on the transaction history, around 1.40 million addresses had previously purchased over 860,000 BTC between $ 32,550 and $ 34,630. Such a significant supply barrier could have the strength to hold the soaring price movement of Bitcoin in check.
It’s worth noting that while the resistance appears stiff, the support looks weak. IOMAP cohorts show that the most significant wall of demand under Bitcoin is $ 31,000. Around 224,000 addresses hold almost 250,000 BTC here.
Hence, just a 4-hour candlestick that is above or below the $ 31,000- $ 33,500 range will determine where bitcoin prices go next.
Moving past the overhead resistance could result in $ 40,000 being reclaimed as support and higher highs to be hit. In the meantime, cutting through underlying support could panic selling among investors and push Bitcoin’s market value to $ 22,500.
Disclosure: At the time of writing, this author owned Bitcoin and Ethereum.
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