Bitcoin (BTC)’s recent price rally from $16,500 to $25,000 can be attributed to a brief slack in the futures market and recent macroeconomic improvements. However, while prices rose, the data suggests that many interested buyers (including whales) stayed on the sidelines.
The recent rally to $25,000 shared many similarities with the 2019 bear market rally, which saw the price of bitcoin surge 330% from the November 2019 low of $3,250 to highs around $14,000. Recently, the BTC/USD pair is up 60% from its November 2022 low.
On-chain and market indicators related to the 2019 rally are sending mixed signals on whether or not Bitcoin’s rally will continue. Nonetheless, there is good reason to believe that the market has reached a crucial inflection point where it can either transition into a full-blown bull market or revert to a long-term bear trend.
Let’s look at the top five indicators to understand the current price dynamics compared to the 2019 bull run.
Bitcoin is tackling historic trading levels
Bitcoin’s price surpassed the 200-day moving average (MA) at $19,600, which could encourage paper traders to open a long position. Historically, this metric has acted as a bull-bear pivot line, with breaks above it being bullish and vice versa.
BTC/USD usually retests the 200-day ma on a breakout, raising the possibility of a correction towards $19,500. However, this was not the case in 2019 when the price continued to climb without a pullback to the 200-day ma.
BTC/USD daily price chart with 200-day MA metric. Source: TradingView
At the same time, traders are likely to be watching the 200-period weekly moving average at $25,100. Bitcoin price had never fallen below the 200-week MA as of November 2022 and reclaiming this level may encourage technical buyers to join the train.
However, until a breakout occurs, traders could remain on the sidelines. Funding rates on perpetual swap contracts are currently neutral, suggesting traders are waiting for confirmation.
Crypto Twitter trader Immortal noted that the market is only at the “halfway point” given the duration of the current rally compared to 2019. The 2019 rally lasted 193 days from bottom to top, while only 92 days have passed since the bottom on November 9, 2023.
Comparison of time from bottom to top locally in 2019 and 2023. Source: Twitter
Immortal goes on to say that BTC/USD could rally as high as $46,000 by March if the 2019 timeline fractal holds in 2023.
A stablecoin supply ratio oscillator is near the 2019 top
The Bitcoin stablecoin supply ratio (SSR) oscillator measures the purchasing power of the market. The indicator measures the ratio between Bitcoin market cap and stablecoin supply. Low values of the SSR oscillator indicate higher purchasing power of stablecoins. Conversely, a spike in the metric indicates overbought conditions.
Bitcoin’s price surge in February 2023 propelled the SSR oscillator to levels not seen since 2019 and 2021. The indicator suggests that the positive trend may end soon. There is a slim chance for a final push higher towards the psychological $30,000 level.
However, the data could be viewed with caution due to the regulatory crackdown on stablecoin BUSD, which led to a significant drop in its supply. It may have distorted the SSR oscillator to indicate overbought conditions.
Bitcoin’s stablecoin supply ratio (SSR) oscillator. Source: glass node
One of the biggest concerns of the current surge is the lack of whale buying. In contrast to 2019, when the number and supply of BTC addresses with more than 1,000 BTC increased when the price shot up and whales were sold in the current rally. The divergence between the number of whales and the price raises concerns about the sustainability of the positive trend.
Number of BTC addresses with a balance of at least 1,000. Source: glass node
The data highlights a crucial pivot between bulls and bears
Investors add to their winning positions on pullbacks in an uptrend, and this is indicated when the Spent Output Profit Ratio (SOPR) indicator stays above one. The opposite happens in a downtrend, where bears dominate the market by selling into rallies. A crossover of the metric above 1 is a potential trend reversal signal.
The 7-day moving average of Glassnode’s adjusted SOPR indicator shows that the bear trend has likely reversed. The indicator turned bullish when BTC broke above $20,800 in January 2023. The metric retested the key support level, with Bitcoin’s price sitting at $21,800, making it a crucial support level for a sustained uptrend.
Related: Bitcoin is nearing the weekly and monthly end with the macro bull trend at stake
7-day MA of bitcoin’s SOPR adjusted indicator. Source: glass node
Similarly, the price has moved above the average buy level by short- and long-term holders, which is another signal of a possible trend reversal. This could be a sign that the market has reached a crucial turning point as on-chain oscillators return to equilibrium.
The metrics also suggest that a potential upside appears likely while the price trades above the support at $21,800, $20,800 and $19,600.
A weekly close above $25,100 could encourage derivatives and technical traders to buy into the current rally, but there are some warning signs that the market may be reaching overheated conditions and a quick correction towards lower support levels cannot be ruled out.
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