Bitcoin Market Update | Week 32 – August 11, 2021

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The Bitcoin market has shown continued strength over the past week in several on-chain and technical indicators. This leads me to believe we will continue to see a bullish advance into the previously set ATH of $65K within a few weeks. Although I’m typically weary of predicting prices above those once established, the data suggests prices above $100K later in this market cycle, barring any unknown major news or changes to the global macroeconomic environment.

Here are this week’s curated data points:

  • The 200-day SMA has been breached and has been holding above pretty consistently.
  • Bitcoins are selling into demand, not weakness.
  • Those hoping for Bitcoin below $30K are now buying Bitcoin above $40K.
  • Exchange balances are at their lowest levels, not previously seen since the May 19 liquidation event, indicating we’re in the early stages of a supply crunch.
The 200-day Moving Average (MA)

Those who have followed these updates know that I’m not a massive fan of Technical Analysis (TA) for analyzing Bitcoin on timeframes longer than a few days. However, TA, used effectively, may provide some value in the stock markets but only because stock markets are inherently opaque.

I prefer analyzing on-chain data, but some TA metrics are helpful simply because we know that others, particularly technical traders, use TA and make investment decisions on the insights they reveal.

Technical traders use moving averages to identify changes in market trends.  The most popular moving averages are the 50, 100, and 200-day averages – these are three lines on a price chart showing the average price over 50, 100, and 200 days.

Earlier this week, Bitcoin surpassed the 200 Day MA at $45,200 and has continued to sustain above this level since. I should note that every mid-cycle correction in Bitcoin’s history has breached the 200 Day MA on the way down. The current mid-cycle correction found the 200 MA at nearly the halfway point between the high of $65K and $30K.  this is an interesting observation and shows how cleanly the price fell and recovered.

 Bitcoins are Selling into Demand, not Weakness

Spent Output Profit Ratio (SOPR) is a metric that tells us whether a more significant number or lesser number of Bitcoin is selling at a profit. It’s a pretty good indicator of the level of demand in the market. When this metric hits a value of 1, there’s a 1:1 ratio of buyers and sellers. When it’s above 1, there are more buyers than sellers. This metric also reveals clues of the predominant behavior of market participants if we relate it to price action.

SOPR recently printed a clear bounce off the 1:1 ratio, indicating a higher level of investor confidence in future higher prices.

An analysis of historical exchange order book data shows not only that bears that were holding out for sub-30K prices were disappointed; we see signs of capitulation and purchases above 40K.

We’ve not yet seen complete capitulation or sustained periods of FOMO that marks later stage buying behavior.  This tells us that this bull has a long way to run. Nevertheless, sustained prices at these levels and above may lend confidence to investors that maintain a wait-and-see approach.

Early Days of the 2021 Supply Crunch

The 2021 Bull Cycle’s intermission is now over.  It’s time to return to your seats for the second act. I strongly believe this act will be marked by a supply crunch and institutional FOMO that will bring prices above $100K and beyond.

Why am I so confident? It’s simple – Bitcoin is a perfectly scarce asset with an open-dataset.  Furthermore, global monetary policy is continuing to trend towards evermore fiat debasement and government spending. The data shows that we are well positioned for an incredibly bullish period, as long as the inflation hedge narrative persist and demand and volume return.

The unique behavior of a massive contingent of Bitcoin investors who will always buy and never sell at any level sets a strong base of support. These investors are comprised of retail, in capital terms, but also of institutional and corporate treasury capital.

We’re entering unprecedented times in terms of available exchange supply.  The next few weeks and months will be interesting to say the least.

Key Takeaways

The Intermission is Over.  We have front-row seats to one of the most exciting times in Bitcoin history. I’ve never seen a more perfectly structured setup for bullish price action over the next several weeks and months.

The global macroeconomic conditions are particularly fertile, with Central Bank driven monetary inflation continuing as well as other actions like the passage of a $3.5 Trillion infrastructure bill in the United States.

Significant fear, uncertainty and doubt (FUD) has been shaken off, including the China ban, ESG, energy debate, Elon Musk’s tweets and Congress’ fumble over new tax reporting requirements.

Short of a black swan event, the coast is clear for Bitcoin to print prices at and above $100K later between September and end of December 2021. We’ll have a better idea of the market action’s texture, amplitude, and behavior as we approach those price levels.