Several signs indicate that Bitcoin price is potentially on the brink of a new bull market
Bitcoin price has been forming a strong correlation with the stock market again, which often happens during global market uncertainty.
The causes that impact to Bitcoin price
For now, traditional investors are concerned about the lack of a second domestic stimulus package in the US and the lack of progress in reeling from the pandemic.
The upcoming presidential elections are also creating some uncertainty. It is more likely that these concerns will not be addressed in the short term, creating further turbulence between stocks.
It is essential to note that this could also have a detrimental effect on Bitcoin, as BTC has never recovered when traditional markets saw chaos.
Bitcoin price stagnates as the stock market slows down
At press time, Bitcoin is trading slightly up at its current price of $ 10,515. This is the price at which it has been trading for the past few days.
Last week, the bulls rallied and attempted to reverse BTC’s recent downtrend, propelling Bitcoin to a high of $ 11,200. The rejection here is quite harsh and ultimately drives it down to the current price level.
Stock markets were able to bounce back slightly today, which is why Bitcoin’s recent slump has stalled.
That being said, the lack of any fundamental development around the stimulus, or pandemic, could continue to weigh heavily on cryptocurrencies.
While talking about the tight correlation between Bitcoin and stocks, analyst Willy Woo explained that the stock’s severe drop would ultimately cause BTC to break its correlation.
Essentially, he explained that the stock has a much greater seller potential than BTC.
SPX looking very weak, if that plummets, I’ll go out on a limb as say BTC will decouple in coming months. Post halvening and reduced derivative trading volumes fundamentally reduce BTC’s sell pressure against bullish fundamentals of an anti-inflationary hedge.
— Willy Woo (@woonomic) September 22, 2020
The stock market’s price action over the next week or two will provide insights into Bitcoin’s medium-term outlook.
Investors move BTC off of crypto exchanges at hastening rates
Several signs indicate that Bitcoin is potentially on the brink of a new bull market, and much higher prices are ahead. However, one seemingly bullish signal that investors are preparing for mark up is actually at the same level as just before the collapse to the cryptocurrency’s bottom.
Although Bitcoin is valuable to different people for many other reasons, chiefly, its valuation is derived from its digital scarcity. Valuation models like the stock-to-flow method look closely at the total BTC supply concerning where it is in the asset’s market cycle and each block reward halving. This theory suggests that as the supply is reduced, demand rises, and so do prices.
In advance of this expectation, crypto investors, particularly whales, have been moving their BTC off of exchanges and into privately owned wallets either through cold storage or on the web.
The crypto community has been high fives all around since this first began starting on Black Thursday, believing its a sign that more and more investors are holding for the long haul. This metric measuring how much BTC is held on exchanges is currently the same level that led to November 2018 plummet to Bitcoin’s bear market bottom.
If moving BTC off exchanges is a sign of a bull run beginning, then why did this level in the past trigger such a selloff?
The total supply matches Bitcoin’s worst drop yet
According to Glassnode, the total sum of BTC held on exchanges totals 2.57 million Bitcoin. And while this is indeed a decrease of 375,000 BTC since Black Thursday, the total number matches November 2018, just as Bitcoin fell to its bear market bottom of $3,200.
BTCUSD November 2018 Versus September 2020 Same Bitcoin Exchange Supply | Source: TradingView
Could Bitcoin be about to take a similar plunge, or is this time different? For one, the last time the crypto asset held on exchanges reached this total, and it was on the way up as more and more investors moved the asset to exchanges to sell it.
This time around, the metric is coming back down, suggesting a pattern of holding behavior. Arcane Research notes that as many as 100,000 BTC has moved into the Ethereum protocol, which explains at least a quarter of the outflow.
While this very well does match up with a level that led to a historic collapse in the past, the fact the statistic is falling, not climbing, could indicate that investors are indeed expecting higher prices. And with less BTC sitting on exchanges ready to be sold, the fewer chances exist for weak hands to panic sell at the first sign of danger.
You can see the BTC price here.
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