Bitcoin Market Not ‘Top Heavy’ Yet But More Consolidation Expected: Analysts

BTC prices have retreated back below $70,000 during Wednesday morning’s Asian trading session but markets are not overbought yet, according to analyst James Check.

“Right now, using a variety of volume metrics as the input, BTC prices appear to be right in line with the fundamentals,” he said in a newsletter on May 21.

Moreover, the market looks like it did in late-2020, he added.

In early December 2020, BTC prices rose to reclaim its 2017 all-time high of $20,000. It consolidated around this level for a couple of weeks before surging to a new peak of $30,000 by New Year’s Day.

The #Bitcoin NVT Price models are a sort of fair value model, imputing a price based on transaction throughput.

Right now, using a variety of volume metrics as the input, $BTC prices appear to be right in line with the fundamentals.

Looks like late-2020 https://t.co/ZvplEcJEUM pic.twitter.com/ppkjjfmBml

— _Checkmate 🟠🔑⚡☢️🛢️ (@_Checkmatey_) May 21, 2024

History Rhyming?

During this recent cycle, BTC prices have climbed to almost reclaim their mid-March peak of $73,738 but have found resistance there, indicating positive momentum and potential for entering price discovery territory.

“Only seven days in all history have a closing price above this [$71,000], so we are really breathing thin air up here,” said the analyst.

He added that “punching a convincing all-time-high is rarely successful on the first go” before stating that a period of “chopping wood” and a couple of significant attempts is very normal.

Moreover, the Network Value to Transactions (NVT) ratio suggests that bitcoin’s price is in line with its on-chain transaction throughput, similar to the conditions seen during late 2020.

Additionally, the short-term holder Spent Output Profit Ratio (SOPR) shows that the market is in an “enthusiastic” but not “euphoric” phase, indicating a potentially sustainable uptrend.

This is a condition in which a significant number of holders are caught off guard and buy too many coins at too high a price.

The Glassnode analyst also mentions a “top-heavy” market condition, where a significant number of investors are holding assets at a loss. However, he notes that this condition has improved significantly, with only 6.6% of the short-term holder supply now held at a loss, reducing the risk of panic selling.

More Chopsolidation Ahead

On May 21, fellow analyst “Rekt Capital” predicted that a weekly candle close above $71,500 “would probably kickstart the breakout from the re-accumulation range.” However, BTC prices had already dipped to $69,782 at the time of writing.

He added that history suggests BTC should consolidate inside this re-accumulation range for several weeks more.

#BTC

A Weekly Candle Close above ~$71500 would probably kickstart the breakout from the Re-Accumulation Range

However, history suggests Bitcoin should consolidate inside this Re-Accumulation Range for several weeks more

Extended consolidation here would get Bitcoin closer to… pic.twitter.com/Af0W4MMBTN

— Rekt Capital (@rektcapital) May 21, 2024