Good afternoon, dear colleagues!
The previous article was written two weeks ago. It is really good news that Bitcoin is gaining in value. It means that hype is gaining momentum.
In this article, we will take a close look at the reasons of the Bitcoin's rise and find out the main signal of the future slump.
Bitcoin needed 86 days to start rising. Before that, it was fluctuating within the range of $8,500/$10,000.
What are the main reasons for a rise in the Bitcoin price? There are a lot of factors. In May, there was the first sign of the increase. It was Bitcoin halving that significantly complicated the process of the digit gold generating. However, the main driver came in mid-June, when there was a boom in decentralized financial applications [DeFi-Decentralized Finance], which triggered a sharp influx of funds into the crypto industry. In absolute value, the DeFi hype has brought more than $3 billion since the beginning of June.
Let's switch to the analysis of crypto accounts. During the last week of July, the number of wallets that store at least $1 million in Bitcoins increased by 38% (to 18,000 BTC addresses). Large investors were actively purchasing crypto assets for large amounts of money.
On July 27, there was a breakdown of the upper limit of the $8,500/$10,000 range. The $10,500 range immediately fell. It was a signal for stop orders. Thus, the upward movement, which we were waiting for so long, finally began. Traders' activity was extremely high. The best proof of such activity is the average commission amount in the Bitcoin network, which during one month (from June 28 to July 28) increased by 750% to $5.80 from $0.68.
The highest commission for a transfer in the BTC system was recorded in December 2017, it was 58 US dollars. Everyone remembers this hype of the cryptocurrency.
On August 2, the most expected level of $12,000 was reached. This quickly led to the fixing of long positions on BTC. We are talking about more than $1.5 billion closed positions, judging only by the main crypto exchanges.
Amid such a sharp profit fixing, the Bitcoin exchange rate fell from $12,000 to $10,546 in six minutes, but after that it recovered to $11,500.
Getting ready for a jump
Bitcoin has proved that it is not an "outsider" in the cryptocurrency market. A local slowdown near $11,000/$11,500 was perceived by traders as an accumulation of trading volumes and may result in further growth of the BTC rate.
Main prospects
Excitement about the decentralized financial applications is still intense as not all money volumes have flowed through the market. This phenomenon means that a breakdown of the $12,000 level could occur any time. For traders the main goal is the local high of $13,868 logged in 2019 (June 25, 2019). At this level, the first attempt to restore the uptrend after the market reversal in 2018 was recorded. A similar scenario of fixing long positions will take place in the area of $13,868.
Main risks
The bitter experience of the ICO (Initial Coin Offering) of 2016-2018 and the IEO (Initial Exchange Offering) of 2019 points to the fact that the DeFi boom will end. The hype of the decentralized financial applications will eventually reach its limit, and the yield of the DeFi will go into a negative zone. This, in turn, will dampen investors' activity and result in a loss of interest in crypto assets.
In each article, we will tackle the issue of the DeFi hype in order not to miss its fading, and most importantly, to identify the end of the BTC's growth in advance.
Life hack
Amid extremely high activity, many crypto assets gained in value. If you trade Altcoins, you should learn a certain rule of the market.
If Bitcoin soars, Altcoin slows down.
If Bitcoin after a rose goes into a temporary sideways movement, Altcoins usually start advancing, adding 10,20,30 and even 100% of the cost.
General background of the crypto market
Analyzing the overall market capitalization of the crypto industry, you can see impressive changes. In two weeks, Total market increased from $272 billion to $347 billion (+$75 billion), which indicates the bullish mood of the crypto market. Not only the dominant Bitcoin is growing, but also Altcoin, which have a positive impact on the emotional component of the crypto industry.
If we look at the volume chart, we can see that the borders of $284 billion and $307 billion have already been passed, and the main level of $366 billion is on the way. It reflects the local maximum of 2019.
The indicator of emotions of the crypto market is at the level of 75 points, which is 31 points higher than two weeks ago. If the reading is above 50 points, the market sentiment is bullish. A score of 75 points indicates high excitement in the market, which can bring impressive changes in the value of the asset.
During the local high of 2019, the Fear&Greed index was at the level of 90 points.
Indicator analysis
Analyzing different time frames, we can see that there is a distinct buy signal on the four-hour, daily, and weekly periods. It is also confirmed by the general mood of the crypto market.
