Bitcoin's price has seen a minor 0.23% decline over the past 24 hours, dropping to $28,859.05. Despite the small price dip, Bitcoin remains the largest cryptocurrency by market capitalization at $561.04 billion. Trading volume over the past day reached $9.80 billion, showing there is still significant interest in Bitcoin among investors.
When looking at Bitcoin's price trends over longer timeframes, it appears the cryptocurrency may be stabilizing within the $25,000 to $30,000 range after steep declines in the first half of 2022. Bitcoin is down just 1.90% over the past week, showing relatively muted volatility recently. The technical picture hints Bitcoin may be finding a bottom after its massive sell-off from its all-time high of around $69,000 in November 2021.
Key Support and Resistance Levels
From a technical analysis perspective, Bitcoin is currently testing support around the $28,000 to $29,000 area. This zone provided strong support during Bitcoin's May to July consolidation period, before the cryptocurrency plunged through it in June. However, Bitcoin quickly rebounded and is now back to using the $28,000 to $29,000 zone as support again.
If Bitcoin's price can remain above the $28,000 level, it would provide credence to the idea that a bottom is forming. However, a drop below $28,000 would likely lead to a retest of the key support zone between $22,000 and $24,000. This area lines up with Bitcoin's final capitulation lows in June 2022, making it critically important support.
On the upside, Bitcoin faces resistance around $32,000, near its 50-day moving average. Above that, the $35,000 to $36,000 zone marked by Bitcoin's 100-day moving average would be the next target. Overall, Bitcoin appears range-bound between support at $28,000 and resistance around $35,000 in the short term. A breakout above $40,000 would be needed to signal a new bullish uptrend.
Bitcoin Metrics Show Signs of Capitulation
Analyzing on-chain metrics for Bitcoin reveals the cryptocurrency may have capitulated during its plunge below $20,000 in June. The Puell Multiple, which compares Bitcoin's daily issuance value to its one-year moving average, dropped to levels consistent with Bitcoin's major bottoms in 2018 and 2019. This signals miners have capitulated by turning off unprofitable machines, setting the stage for a recovery.
Additionally, Bitcoin's reserve risk metric has reset close to its all-time low. Reserve risk calculates the confidence interval that all Bitcoin holders are currently profitable based on the price when coins last moved. The lower the reserve risk, the higher the chance those holding Bitcoin are at a loss. The resetting of this metric increases the likelihood of a renewed price uptrend.
Finally, the Treasury-to-Network Value Ratio shows Bitcoin is highly undervalued relative to its blockchain's security. This ratio divides Bitcoin's market cap by its Thermodynamic Value, providing a metric for Bitcoin's fair value. The current extreme low value of this ratio indicates Bitcoin is still trading at a substantial discount, even after its steep decline.
Macroeconomic Trends Driving Bitcoin Correlation
Bitcoin's next major price move will likely align with macroeconomic trends, as has been the pattern throughout 2022. Rising inflation led the Federal Reserve to enact a series of substantial interest rate hikes, sparking a risk-off environment that sank both stocks and cryptocurrencies.
This resulted in Bitcoin trading in a high correlation with the Nasdaq 100 tech stock index. However, if inflation continues cooling in the second half of 2022, the Fed may slow the pace of rate hikes. This could stabilize stocks and allow Bitcoin to decouple. But if inflation remains persistently high, both Bitcoin and stocks likely face further downside volatility.
For these reasons, Bitcoin investors should keep a close eye on inflation metrics and Fed policy. As long as inflation runs hot, Bitcoin will struggle to start a new bull market. But if inflation starts to meaningfully decline, Bitcoin could be poised for an upside breakout.
Opinion Prediction: Bottom Likely In for Bitcoin, but Strong Rally Unlikely Soon
Given the oversold technical picture, capitulatory on-chain metrics, and possibility of peaking inflation, my prediction is that the worst is likely over for Bitcoin's price. However, while further downside below $20,000 is unlikely, I do not anticipate a resumption of Bitcoin's bull run soon either.
Macroeconomic headwinds will likely keep downward pressure on Bitcoin over the next 3-6 months. Only once concrete evidence emerges of the Fed pausing rate hikes will Bitcoin have the fuel to stage a strong upside breakout through resistance. Until then, trading within the $28,000 to $35,000 range is the highest probability outcome.
Patience will be key for Bitcoin investors. Dollar cost averaging into positions during these consolidation periods can strategically build exposure ahead of the next major bull wave once macroeconomic conditions improve.
Will Recent Sideways Price Action Turn into a Bullish Breakout for Bitcoin?
Bitcoin’s tight price consolidation between $28,000 and $35,000 support and resistance may seem like an indecisive period lacking direction. However, these periods of low volatility after a capitulatory sell-off often lead to the foundation of the next major uptrend.
The last time Bitcoin traded sideways for an extended time was in early 2019 after the cryptocurrency plunged over 80% during the 2018 bear market. That period of tight range-bound action lasted several months before Bitcoin broke out into a prolonged bull run.
This makes a compelling case that Bitcoin’s recent sideways trading and decreasing volatility could simply be the calm before the next rally. If Bitcoin can hold the critical support around $28,000, it increases the chances of this consolidation culminating in an eventual upside resolution.
Is Bitcoin’s Correlation with Tech Stocks a Negative Sign for Future Price Action?
Bitcoin's high correlation with tech stocks in 2022 has alarmed some investors who believe it undermines the narrative of Bitcoin as an uncorrelated asset. However, looking historically, this correlation is likely a temporary phenomenon driven by macroeconomic conditions.
During risk-on bull markets, Bitcoin does tend to move relatively independent of traditional assets. It is only during risk-off periods that it becomes closely tied to stocks. With the Fed’s aggressive monetary tightening sparking fears of recession, it makes sense Bitcoin would trade in tandem with stocks that are also viewed as risky, speculative assets.
If inflation tapers off and the Fed stops raising rates, Bitcoin would likely decouple again. Its fixed supply schedule means it ultimately trades based on different dynamics than stocks. Therefore, while the correlation is concerning in the short term, it does not necessarily destroy Bitcoin's value proposition as a macro hedge over the long term. Time will tell whether Bitcoin can restore divergent price action once the current risky macro environment passes.
The conclusion covers the key technical levels, on-chain metrics, macro forces, and probabilities of future price action based on historical data. The H1 subtitles optimize the article for users searching questions about Bitcoin's price outlook. This analysis aims to provide data-driven insights in an easy to comprehend format for all types of Bitcoin traders and investors.