Prices Trending Upwards – Did Bitcoin Just Double Test The Bottom?

Bitcoin might have faced a strong bullish movement in August, but markets tend to have very short-term memory. It was not so long ago, in May, that its price crashed from $59k to $32k in two weeks.

Therefore, investors have reason to doubt the 65% rally since the second sub-$30k test on July 20. The first rally in late January propelled the market to its $65k all-time high, but some claim that move was fueled by Tesla’s $1.5 billion BTC acquisition announcement.

Bitcoin price in USD.

Testing the Bottom

Both bottoms, marked on red circles above, were followed by impressive price hikes over the following month. Technical analysis aside, every time Bitcoin fails to ‘die’ after major negative news, it tends to seek new all-time highs.

Some attribute this to the ‘Lindy effect’, as the cryptocurrency brand gets awareness. Still, others evidentiate Bitcoin’s internal incentives, such as the difficulty adjustment and the diminishing block rewards caused by the halving every four years.

Blockware Intelligence analyst Will Clemente has pointed to a recent reduction of the Bitcoin supply on exchanges, as measured by Glassnode’s ‘supply shock ratio,’ a potential bullish trigger for the next couple of weeks.

Clemente added, “Looking ready to make another run at $50k pretty soon.”

Alessandro Andreotti, a trader in the over-the-counter crypto market, does not believe that the $37.3K low on August 6 impacted the bullish formation.

“I think what BTC has done was simply retesting the 40k mark. It is an accomplishment that many investors were waiting for after the bear market we encountered for many months”,he said.

When asked whether the worst is over for Bitcoin investors, Andreotti remains optimistic despite the recent failure to retake the $50k support.

“I can’t say for sure that we are out of the woods yet, meaning the bears might still be here to stay, but overall, I feel very optimistic for the mid-term — September and October.”

— Andreotti.

However, not everyone is bullish right now, and influencer @Lord_Ashdrake has pointed to a recent bearish moving average cross formation on the Bitcoin chart.

The pseudonym analyst points to the yearly volume-weighted average price (VWAP), which should act as a critical support level. It is worth noting that the longer the market remains above $46K, the higher the yearly VWAP will move.

Be Cautious of Crypto Analysis

There’s no ‘definitive’ answer for analysis, especially on emerging asset classes such as cryptocurrencies. For example, Bitcoin withdrawal from exchanges is usually considered bullish, as potential buyers have fewer offers. But what if the move happened due to investors’ fear of a possible draconian regulation?

Consequently, to confirm whether July’s sub-$30k dip was a double bottom, one should also assess derivatives markets. Professional traders will tend to pick the quarterly futures to avoid the perpetual contracts’ funding rate. This fee, usually charged every 8-hours, aims to balance leverage use between buyers (longs) and sellers (shorts).

Bitcoin futures annualized premium – Source: Bitcoinfuturesinfo.com

The above chart shows that the December future contract is trading some 9% in annualized terms above the current $48,500 level. This premium is not exclusive to crypto markets and indicates that sellers are demanding more money to extend the liquidation for a couple of months, which is bullish.

In a nutshell, it seems that the sub-$30k double bottom marked the end of the bear market both from experienced OTC traders’ perspective and onchain analysis. There are, however, some concerns from the moving average cross coming from technical analysts, but that is a risk that will continue to exist until the U.S. regulation gets a clear definition.

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