As a seasoned analyst with a decade of experience in the cryptocurrency market, I’ve seen my fair share of bull runs and bear markets. The recent death cross pattern formed by three popular Bitcoin momentum indicators has me a bit concerned, especially given my past experiences.
The data indicates that three commonly used Bitcoin trend indicators have recently displayed a death cross configuration. Historically, such a setup has often been followed by the following outcomes.
Bitcoin Momentum Indicators Have Seen Bearish Crossovers Recently
In a recent article on CryptoQuant Quicktake, an analyst delved into the current pattern seen in three Bitcoin-related momentum indicators. These momentum indicators are essentially composite measures that involve significant moving averages associated with the digital currency.
The “Active Address Momentum” refers to analyzing the 30-day and 1-year moving averages (MA) of the daily count of Bitcoin addresses that have participated in any transaction on the network, be it as a recipient or a sender. In other words, an address is considered active if it takes part in a transaction during the given day.
The number of Active Addresses may be the same as the number of users visiting the network, so this metric tells us how the blockchain activity is looking right now.
As a researcher, I’d like to draw your attention to the graph I’ve been provided with, which illustrates the evolution of the 30-day and 1-year moving averages (MAs) for Active Addresses over the past couple of years from my perspective.
Looking at the provided graph, you’ll notice that the typical number of active addresses per month dropped below the yearly average shortly following the asset reaching its latest record high (peak). Since then, this monthly average has stayed lower than the annual average.
This blend suggests that transactions on the Bitcoin blockchain have been decreasing recently. Typically, a rally is maintained by user engagement, so it’s essential to see more active addresses to ensure a more lasting growth.
With investor interest in cryptocurrencies waning, it seems the conditions for a new bull run may no longer be present. Interestingly, the same chart pattern – a crossover similar to what was observed at the end of the first-half bull run in 2021 – has emerged, yet it’s worth noting that a rally in the second half of that year still took place.
The second momentum indicator is the famous Market Value to Realized Value (MVRV) Ratio, which tells us whether the investors are in profit or loss.
According to the graph, the MVRM Ratio (assuming “MVRV” is a typo) has recently dipped below its yearly level, indicating that investor profits are decreasing. This pattern, known as a “death cross,” has typically preceded a shift towards a bearish trend in Bitcoin. In fact, this same pattern was observed before the 2022 market downturn began.
Moreover, note that the Bitcoin price’s 50-day and 200-day Moving Averages have intersected in a manner suggesting bearishness.
As I analyze the various Bitcoin indicators, it appears that we might be witnessing some concerning negative trends. This could potentially signal a short-term shift towards a bearish market for Bitcoin.
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2024-09-06 12:04