All eyes are on bitcoin after Tesla announced its purchase of $1.5 billion of bitcoin on its balance sheet.
This news was followed by a flurry of announcements from MasterCard, BNY Mellon and other announcements which made headlines, spurring bullish impetus to fresh levels.
But as the old trading adage goes: show me the charts and I’ll tell you the news – so let’s look at them.
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Macro Cycle Indicators suggest we are not near the major cycle top yet
RHODL Ratio is an on-chain indicator which has predicted major market cycle tops for bitcoin.
The indicator uses Realise Value HODL waves which are then weighted by the Realised Value of Coins in each band.
Realised value is the summation of the product of UTXOs and the prices at which they last moved. One obvious advantage of using “realised value” is that it removes the value associated with lost coins and the noise from short-term trading.
More to the point, the RHODL band of 1 week versus that of 1-2 years describes whether the market is becoming seriously frothy over oversold. As of this moment, the Realised HODL Ratio shows that there is still some way to go before the market enters into the red zone, which would be a significant market top indicator if and when it’s reached.
Temporary near term market top in the making?
Meanwhile, an indicator that is more suited to picking major near-term highs in addition to end-cycle highs is the MVRV Z-score.
Briefly, it looks for extreme differences in market value and realised value at any given moment. In doing so, it is able to show when bitcoin is greatly overbought or oversold.
When the orange line enters the red zone, it shows that bitcoin is overbought, increasing the likelihood of a pull back. While the chart still has some way to go, bitcoin will probably enter this zone in the coming weeks. Historically, this has been a very good moment to take some profit.
Where could bitcoin top out?
Assuming high time-frame bullish continuation and a mid-term pullback, the next targets for bitcoin can be plotted using the fib extension tool.
- Target 1: $55,000
- Target 2: $72,000
- Buy the dip scenario: $38,000
Since the mid-term pullback scenario has not come to fruition yet, it’s hard to accurately anticipate higher price-targets after the event due to increasing unknowns. As you may know, the further out you project the less accurate a model becomes due to the exponential compounding effect of less information.
This write-up is not financial advice.
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