Fundamental & Technical analysis paint a slightly different picture for the premier digital asset
Crypto market has seen a tremendous upside since November of last year. It was around this time that the mega-bull run in Bitcoin started to shape up. After reaching an all-time of just over $58k in late February, BTC has hovered between $43k to $52.6k in the past three weeks. Although consolidation seems to be going on in the premier digital asset and some of the other cryptos, the bigger trend of higher lows still seems to support the price at the current levels.
Those who are familiar with the trading of the various instruments in the financial markets understand that both fundamental sets of factors and technical analysis determine the price action in any asset. Although I lean more towards the latter for my analysis, that doesn’t make either of them more or less important. For today’s research, we look at both these factors to determine the support levels in BTC price.
Looking at the fundamental factors first, we need to figure out the amount of bitcoin owned by different types of holders and their cost of acquiring bitcoin. Since November, a large number of big-money investors entered the digital assets market hold a large amount of bitcoin acquired at a high price, then the price should not fall much below their high average cost of acquisition.
Analyzing the data from the Chainlysis Market Intel, it seems that is actually the case (chart above). Investors who have acquired at least 1k bitcoin each, known as whales, in the three months prior to the start of March 2021 hold 1.7 million bitcoin and on average they paid $35.8k per bitcoin — highlighted by the orange bar in the left figure above.
Long-term investor whales hold a further 3 million bitcoin, with costs ranging from an average of $13.4k for those that acquired their bitcoin in the last 3 to 12 months, to just $383 per bitcoin for whales who held more than 1k bitcoin before 2017. New large investors, however, are different from the longer-term as the former are willing to buy BTC at a much higher price — which is likely to provide a price floor above $35k.
The same research suggests that at the end of November 2020, new large investors held 1 million bitcoin that they acquired at an average cost of $14.8k per bitcoin — orange bar in the right chart above. This means that investors who have entered in the last three months have bought far more bitcoin at a far higher price than the investors who entered in the three months prior to the end of November, or at any point in the past. Simply put, there is far stronger support at this leave than ever before.
Technically speaking, there is a strong support zone in the $42–44k region above which the BTCUSD not only stays in a bullish channel but also maintains the strong bullish bias that we have since November of 2020. A break of this level would turn the medium-term bias neutral and a further fall to $30k could be seen. This price level is far stronger support and is expected to hold. For now, price action remains constructive to the upside.
At the time of writing, BTC was consolidating around $50.4k. As usual, please don’t consider this as investment advice — do your own due diligence and trade according to your risk profile.
Originally Published on Medium