Beware of Bitcoin Bull Traps Until Jan 2021, says On-Chain Analyst
Bitcoin has yet to indicate the direction it wants to go in as the leading cryptocurrency continues to take its investors on a roller coaster ride.
Last week, we had a dip around $17,600 only to make it to $19,500 over the weekend. On Monday, BTC made its way from $19,000 to $19,570 only to drop back down to $19,065.
At the time of writing, BTC/USD has been trading at $19,400 in green but on a low volume of just $2.66 billion.
According to one trader, Bitcoin is back within its range, and it is likely to further range in which it would either consolidate or have a distribution before making the next move. He said,
“Printing HLs (16,200 – > 17,600) is bullish and all dips are being bought strongly, anticipating move up. Below 17,6 invalidation.”
As Ki Young, CEO of crypto data provider CryptoQuant notes, Bitcoin whales are also back to depositing to exchanges as per All Exchange Inflow Mean, and “whales need more time to make a profit here.”
Road to $20k – watching $19,700 as a last key level to break and close above
I don't think Bitcoin creeps slowly over $20k – imo, it rips up with solid momentum when it happens pic.twitter.com/54A6o76Iwg
— Josh Rager 📈 (@Josh_Rager) December 15, 2020
As the market continues to see bouts of upward breakouts, it is time to be cautious of any fake outs.
Here, on-chain analyst Willy Woo focuses on SOPR, an indicator calculated from spent outputs, and price sold / price paid. Woo said,
“Profit-takers initiated weeks ago, we need to wait until they exhaust before there's full freedom to explore new highs. It's a waiting game, likely until Jan 2021 for a full reset.”
“Till then beware of bull traps.”
When SOPR is greater than 1, it means owners are in profit and otherwise at a loss. As a general rule, people are comfortable selling when they are in profit. According to Renato Shirakashi, who is behind this indicator,
“in a bull market, when SOPR falls below 1, people would sell at a loss, and thus be reluctant to do so. This pushes the supply down significantly, which in turn puts an upward pressure on the price, which increases.”
During the current market, the ETA for the SOPR to go to 1.0 so that the market can move forward following the completion of the sell-off and coins no longer carrying profit, is January, as per Woo. He added,
“Is it possible for SOPR not to reset? Yes, that's the grandma telling me to buy BTC signal.”
Since last November, the decline in SOPR is a short-term bearish — “a shake-out than a trend reversal.” And this could help identify the local bottom before the upwards trend.
In the bigger scheme of things, the Long-Term Holder MVRV Ratio is giving off an “extremely bullish signal,” which according to Glassnode, if follows the same trend as last time would see a market top over $270,000, in this bull market.