Bitcoin’s Spot Volume Lowest Since Early 2021, Volatility on the Horizon and Potential Fall to $11,000?
Bitcoin ending its uptrend. A downward move expected but how low? | Credit: Shutterstock
Key Takeaways
- Bitcoin spot volume is the lowest since 2021
- NVTS signals an extremely overvalued zone
- Chart analysis indicates the start of a downtrend
- Two scenarios ahead
The price of Bitcoin has declined from its July 13 spike of $31,800, falling to $28,477 at its lowest point today, August 1 which is a decrease of 10.65%.
With its volume sitting at its lowest since late 2020 – early 2021, and its price struggling to maintain an uptrend are we in for the start of a major downtrend?
Bitcoin Fundamental Analysis
As per Messari data , the Real Volume, which attempts to deduct an estimated “wash trading” volume from the exchange reported volume, we actually haven’t seen these low levels since February 2019.
With low volume the trading price becomes uncertain or in other words, it is questionable. If the volume is high that means that more investors are participating in the assets value determination consensus – the price. And, with it being in an uptrend, it could prove to be based on weak hands.
From July 17, we have seen an increase in Bitcoin held in exchange reserves per Cryptoquant . Although compared to the longevity of the previous downtrend, this isn’t a significant rise, it could prove to be an early indication that the coin holders are starting to deposit BTC to sell.
According to Woobull Network Valut to Transactions Signal (NVTS), we could have reached the overvalued zone.
This metric is calculated as Network Value / 90d MA of Daily Transaction Value and serves as the market top and bottom signal. Its value reached the highest level of 2.23, last seen in November 2013 when the second-ever Bitcoin bear market started.
Compared to the usual high level with the price chart, we can clearly see that this metric has provided an indication of market tops and proved to foresee price drops.
Does this extreme value mean the next price drop will be even more dramatic?
Bitcoin Price Prediction
As the price of Bitcoin reached the ending point of an uptrend that started on November 21, 2022, two different scenarios can play out moving forward.
Bullish Scenario
Since the November 21, 2022 low of $15,457 was a lower low compared to the June 18 same year, this would be the only point from which we can count the start of the bull cycle.
November 21, 2022, low market, the completion of the previous downtrend from November 9, 2021, counted as a five-wave impulse of the lower degree, and the C wave from the ABC correction that started on April 13, 2021, when the price of Bitcoin was $64,227.
According to this count, we have now seen the completion of the first bull market wave and are now waiting for the same degree correction for wave 2. Typically, wave 2 ends around the 0.618 Fibonacci retracement level of wave 1, which now comes at the target of $20,340. Wave 2 can, in theory, retrace the price by 100% and still be valid, so a deeper price target could be seen.
After the completion of this retracement which would establish the first higher low, we can potentially see the start of wave 3 and the price of Bitcoin headed into another multi-year bull cycle.
Bearish Scenario
In the bearish scenario, the waves are counted a bit differently, namely in the degrees and sub-degrees.
In contrast to the bullish count where the rise from November 21, 2022, is a first five-wave impulse, in a bearish scenario, it still is a five-wave impulse but of a lower degree count, which in conjunction with the recovery we have seen from June 18 – August 14 the same year, makes an ABC correction.
This ABC correction is wave 4 of the higher degree count from the five-wave impulse that started on November 9, 2021, when the price of Bitcoin reached its peak of $68,715. If this scenario is in play that would mean that the price is now headed for the starting wave 5 which is set to make a lower low compared to June 18 last year.
Since the most significant support zone to the downside is around $11,000 that would be the projected target for the end of the bear market.
Conclusion
With low volatility, weak fundamentals, and the price chart pointing out the completion of its 232 days uptrend (November 21, 2022 – July 13, 2023), we are now going to see the start of the large descending move.
According to the bullish count, the price of Bitcoin could fall to the $20,300 area, while in a bearish one, it could see a further low of even $11,000. It is still early to say which one is more likely, but since in the mid-term, we are expecting the move in the same direction, from its momentum and character we are going to evaluate these possibilities.
Disclaimer
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.
