BTC Enters Third Quarter with Shaky Indicators
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Bitcoin (BTC) trading remains shaky, with uncertain sentiments as the leading coin ended the quarter with the worst loss since 2018. The next period once again faces the challenges of revealing the price direction and the validity of growth models.
BTC is still not out of the current downtrend, and the actual demand is unclear. Predictions hinge on short-term price moves toward $35,000.
BTC touched the $36,000 level mid-week, but quickly slid to a lower range. Signs of accumulation at a lower price range may mean BTC will be able to bounce instead of sinking to new lows.
BTC Miners: Capitulation or New Opportunity
Since the announced shutdowns of mining farms in the Sichuan province of China, the Bitcoin hashrate has declined in the range of 50-70%.
In less than 24 hours, the Bitcoin network will undergo a significant shift, as it faces a historical difficulty adjustment. The predicted downward adjustment will be more than 26%, essentially making it 26% easier and cheaper for miners to produce a block.
The two previous periods adjusted difficulty downward by 15% and 5% respectively. BTC mining difficulty is still close to historical highs, but the growth has flattened out. The absence of some big Chinese miners means other block producers may receive more BTC due to lowered competition.
BTC mining may recover to overcome the farm shutdown anomaly, as the new lower difficulty will attract miners at least in the next two-week period.
For now, it is uncertain if the equipment would be shipped to other regions and if other farms would compensate for the diminished hashrate.
BTC S2F Model Faces Bigger Challenge
Despite hovering above $33,000, BTC is still facing a reckoning on its price action. The stock-to-flow model is showing the current price touching the lower bound of the range, with some fears the model may break down this time.
However, the S2F model has managed to hit most of its milestones, especially after the block reward halving in 2020.
The model has not been invalidated so far, despite short-term fluctuations.
Puell Multiple Model May be Misleading
One of the BTC models of mining-related to price growth, the Puell Multiple indicator, is in a zone that may suggest buying BTC is a good choice. The indicator may be misleading, despite hovering in the 0.5 value range.
The Puell Multiple measures the current daily issuance of BTC in dollar value against the 365-day moving average of the value of mined coins. Even at today’s relatively large prices, the ratio is showing fewer BTC entering the market. David Puell, the creator of the quantitative measure, warned traders to take the ratio with some skepticism as being potentially misleading.
But in the past, a low Puell ratio meant miners deliberately shut down machines or capitulated due to an unprofitable market. The current slide in mining is an anomaly due to government meddling, and not a decision on the side of miners.
Miners themselves have no reason to capitulate, as the current market prices cover the cost of BTC production and ensure mining is currently profitable.
BTC Rainbow Chart Looks Encouraging
The BTC rainbow chart suggests current prices are in the “still cheap” range and may see accumulation. The chart does not guarantee an immediate bounce, and allows for accumulation at lower prices.
The rainbow chart is still away from a definite buy signal, and its lower range may lie even below $20,000 in the current price cycle.
BTC Braces for Another Low-Volume Weekend
The volatility of BTC increased significantly in the past year, from a low of 1.65% on average in the summer of 2020 to the current levels above 5.2%. The average volatility measure expanded both due to upside and downside moves.
But the biggest change arrived from the 50% loss from the $64K range. Now, BTC braces for another weekend where relatively low trading volumes may lead to testing a lower price range.
BTC stood at $33,406.68 on Friday, with trading volumes down to about $33B in 24 hours, down from peak trading above $123B in 24 hours. The asset remains volatile, quickly adding $400 after bouncing from the $33,000 level. Market cap dominance expanded to above 47% as altcoins deepened their losses.
BTC flows to exchanges are also slowing down, showing enough holders ready to wait out the volatility.
This tendency is paired with renewed interest for institutional BTC trading. Recent rumors suggested billionaire George Soros opening a BTC trading fund, with no immediate confirmation.
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