- According to two price indicators, BTC has not bottomed yet.
- Bitcoin managed to break the $40,000 again but it didn’t last for more than six hours.
- Currently, there are 2.2 million active BTC over the past 30 days.
Traders are using different strategies to know whether Bitcoin’s (BTC) price has bottomed yet. Meanwhile, on-chain activity and derivatives data show that the situation remains uncertain.
Ever since the $30,000 on May 12, traders have been waiting for its trend reversal. Apparently, it reached $12 billion worth of futures long positions being liquidated.
However, traders’ confidence remains decreasing. Hence, the crypto community started looking for trend reversal signs. For example, analyst @immortalcrypto said a new high followed by a move above $40,000 is enough.
We need to make a new Higher High to confirm a local bottom.
— Inmortal (@inmortalcrypto) May 24, 2021
Meanwhile, few days after the dip, Bitcoin managed to break the $40,000 again but it didn’t last for more than six hours. Thus, other analysts think that a retest of the $30,000 bottom is needed before a bounce.
It should be noted, market prices do not always react to external news or previous chart formations. In comparison to stocks, crypto investors (particularly BTC) can’t rely on commonly used valuation multiples or even comparables.
Furthermore, traders also monitor the number of BTC that have been active lately. This indicator can’t be considered bearish or bullish by itself because it doesn’t provide data on how old the involved addresses are.
As of writing, there are currently 2.2 million active BTC over the past 30 days based on the above chart from CoinMetrics. More so, this is significantly higher than levels seen before October of 2020.
Clearly, with this first indicator, the price rally from October 2020 and the peak in April 2021 caused an increase in the supply. Of note, when this metric presents a sharp decrease, it means that investors are no longer interested in participating at the current price level.
On another note, based on the skew indicator, it suggests that a 25% delta skew swinging between a negative 10%, and a positive 10% is usually deemed neutral.
Whenever whales and experts lean bullish, they will demand a higher premium on call (buy) options. Hence, this trend will cause a negative 25% delta skew indicator. Meanwhile, if downside protection is more costly, the skew indicator will become positive.
Consequently, as the market goes down, so does the 25% delta skew indicator, and the cost of protective options spiked. Therefore, until the metric establishes a more neutral pattern nearer to the 5% level, it seems premature to call the market bottom.
To conclude, traders should not think that Bitcoin has bottomed yet based on the skew and active supply indicators. Lastly, until the market no longer has relevant activity surrounding the sub-$40,000 level, BTC should be fine.