Luno’s market analysis: The bulls are back in town

Welcome to this week’s retrospective of the latest goings-on in the crypto markets, featuring an overview of price movements, a look at the fundamentals, and the impact of other major events over the last week. The content of this article is for information purposes only and is not investment advice or any form of recommendation or invitation. Luno always advises you to obtain your own independent financial advice before investing or trading in cryptocurrency.

In last week’s Luno Market Update, we questioned whether volatility had left the crypto market. We got our answer almost immediately – of course volatility hasn’t left the crypto market! Not only that, but things are looking good across the board. Bitcoin and Ethereum are both hitting new yearly highs, smashing through resistance levels as if they weren’t even there.

Is this the start of the bull run that has been promising to take off since the halving? The charts are lighting up and the indicators are extremely positive for the first time in a while, as we see in this report. On the other hand, this wouldn’t be the first false start we’ve seen recently. The global economic climate remains precarious and we are in uncharted territory, so any celebrations should be entered into with a degree of caution.

However, while maybe we shouldn’t be counting our chickens, it’s about time the crypto community had something to celebrate. You never know, next week we could be settling another age-old Bitcoin debate – when moon?

Price analysis

Short-term view

The bulls seem to be back in the driver’s seat at last. After a strong build-up over the weekend, BTC skyrocketed past the psychologically-important $10,000 barrier and its yearly high on Monday, only hitting resistance at the $11,400 mark – a level that hasn’t been tested in nearly a year.

The strong showing pushed the Relative Strength Index (RSI) well into the overbought zone and sparked a predictable retrace for BTC, sending it back down again to test the $10,500 mark and previous yearly high. However, a sharp rebound was imminent, bringing it back up past the $11,000 range at the time of writing.

Long-term view

The strong upward momentum this week, coupled with large associated trading volumes, has breathed some much-needed life into the market after a lengthy period of stagnation unfamiliar in the crypto space amidst COVID-19 and lockdown.

Looking back further, BTC’s most recent movement has also coincided with a break out from a long-forming downward trend line that has been developing since the highs of 2017. This pushes us into a new range and has forced traders to start redrawing their battle lines. And while BTC will need to hold above the current levels in order to consolidate its position, early indicators are looking favourable for the bulls at this point.

Levels to look out for

In order to consolidate its momentum and keep pushing upwards, BTC will need to hold through its current retrace. The recently-broken yearly high of $10,500 can be looked towards as a support zone to hold off any downward pressure. Should this level be broken though, we would find ourselves in familiar territory, with plenty of support to be found between the $10,000 and $9,500 range.

Looking toward the upside potential, BTC has a lot of headroom. We need to look back as far as August 2019 to find the nearest-tested resistance zone at the psychological $12,000 mark, with incremental barriers also found at $13,000 and $14,000.

Reasons to be cheerful

The Fear & Greed index has turned extremely greedy for the first time in 2020, showing signs of an exuberant market sentiment. So far this year, the index has mainly hovered around the fear area and has only been able to spike towards the greedy terrain for short time periods. The last time the Fear & Greed index saw these levels was during the peak euphoria of July 2019.

Bitcoin volume surges

Monday saw the fourth highest real daily volume recorded this year at $3.7 billion. The volume has been trending downwards for months, but as BTC gained momentum and soared through the yearly highs, the volume is now finally trending upwards again.

High daily returns – Volatility is back

Last week we focused on the historically low volatility in BTC, with BTC approaching its flattest month ever recorded. As BTC posted a daily return of 10.9% yesterday, this is definitely not the case anymore. The 7-day volatility has risen to 3.68% from last week’s lows of 0.5% and is currently on par with the average 7-day volatility seen throughout the year. The 7-day volatility also flipped the 30-day volatility, indicating that the trend of low volatility is about to change.

Active BTC Addresses reaches 2 year high

The number of active BTC addresses reached a 2-year high this week, peaking on Friday with 1,081,981 active addresses. Only 29 days ever have seen more usage and all of them were in late 2017/early 2018. An active address is defined as the number of unique “from” and “to” addresses used per day. The median transaction fee of BTC was $1.97 on the day of the peak – significantly lower than the median transaction fees of the transactions conducted during the 2017-2018 peak. This indicates that the implementation of on-chain scaling solutions such as SegWit and batching has improved the efficiency of the Bitcoin blockchain.

Keep reading…

Luno’s market analysis – Week 30

The week in review: Ethereum 2.0 ready for launch?

Anthony Pompliano: “I think Bitcoin’s going to go to at least $100,000”

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