Bitcoin Rips To $21,000, Shorts Demolished In Biggest Squeeze Since 2021
Bulls take charge with massive upward momentum in the bitcoin price. We analyze key price levels to watch to determine whether this is another bear market rally or a move with actual lasting power.
Time-Based Capitulation: Bitcoin Volatility Hits Historic Lows Amid Market Apathy
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Key Levels For The Bitcoin Price
One of the most useful models in tracking the cyclical tops for both the S&P 500 Index and bitcoin since March 2020 has proven to be net liquidity, an original model by 42 Macro. Net liquidity tracks the changes in Federal Reserve total assets, the U.S. Treasury general account balance and the reverse repo facility. A lower net liquidity translates to less capital available to deploy in markets. We find it useful as a key macro indicator to assess current liquidity conditions and how bitcoin trades in the market.
Bitcoin has acted as a liquidity sponge throughout its life and contracting liquidity in all markets has had a significant impact on the bitcoin price and trajectory. Ultimately, that’s one of the main drivers of our core long-term thesis that bitcoin’s growth depends on an environment of perpetual monetary debasement and expanding liquidity to work against current levels of unsustainable sovereign debt and deflationary forces. In the short-term, it’s not clear when overall liquidity will increase again en masse. That’s the trillion dollar question and the topic of conversation on which everyone is speculating. Net liquidity provides a view into that trajectory as a measure that’s updated weekly with fresh data.
Bitcoin is seeing some of its largest relative strength since January 2021, but it also comes at a time when we’re seeing a significant daily uptick in net liquidity after a period of historically low volatility. The uptick is driven by a much lower reverse repo balance since the start of the year. With the Fed’s position of “higher for longer,” a projected view of Core CPI at 3.5% for 2023 and continued balance sheet runoff, we will likely see net liquidity decline — barring a spontaneous or emergency policy reversal.
Below is a list of key price levels worth watching as we wait to see how the market responds to bitcoin’s strength over the last few days. Price is now above both the 50- and 100-day moving averages and just a touch below the 200-day moving average. Sitting right above the 200-day moving average is both the on-chain realized price of $19,700 and the 2017 cycle top. These are key levels to watch over the coming weeks to see if we have continued momentum or rejection at that price.
The following is an excerpt from our new Bitcoin Magazine PRO Market Dashboard that we plan to release to paid subscribers sometime this month. Apart from the Mayer Multiple, status signals here compare the current price versus key price levels as a simple sign of bearish or bullish momentum. By upgrading to being a paid subscriber, you will get first and exclusive access to our new Markets Dashboard upon release.
Price has broken above the short-term holder realized price. That’s happened only a few times in this bear market and these events were short-lived. As this price reflects the average on-chain cost basis of the more recent buyers, it will be key to see if these market participants are looking to sell here at cost or if they will stay to continue with the momentum.
The rest of this article is open to paying members only. Here’s what’s behind the paywall 🔏:
Bitcoin’s relative strength and Mayer Multiple data.
Analysis of bitcoin’s delta skew for the options market.
A closer look at seller exhaustion levels.
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