On October 20th, the price of Bitcoin (BTC) rebounded to $30000, eliminating the massive liquidation losses caused by Cointelgraph's erroneous news report on Monday.On chain analysis outlines the factors that may drive BTC towards the $40000 milestone
On October 20th, the price of Bitcoin (BTC) rebounded to $30000, eliminating the massive liquidation losses caused by Cointelgraph's erroneous news report on Monday.
On chain analysis outlines the factors that may drive BTC towards the $40000 milestone.
On Friday, the price of Bitcoin hit $30000, and the market responded to multiple bullish macro events, including Grayscale reapplying to the US Securities and Exchange Commission for a spot Bitcoin ETF.
Will bullish investors insist on recovering $40000?
The rise in Bitcoin's dominance may push prices towards $40000
On Friday, the price of Bitcoin exceeded $30000, with a weekly increase reaching double digits.
However, important indicators indicate that BTC prices may continue to rise in the coming days.
Firstly, since October 10th, Bitcoin's dominant position (BTC) has risen for 10 consecutive days.
This is very unusual. From a historical perspective, once BTC achieves significant returns and breaks through milestone price levels, investors will begin to diversify and introduce funds into counterfeit coins to amplify their strategic returns.
However, the unstable macroeconomic situation and events surrounding the Middle East crisis may make investors unwilling to invest in counterfeit currency this time.
The recent trends in BTC confirm this argument:The "safe haven" status of Bitcoin may further accelerate the current price increase.
The figure below shows that when the crisis broke out on October 7th, Bitcoin's cryptocurrency market share was 51%.
After two weeks of escalating tensions, Bitcoin made further progress, with BTC rising to 52.71% on October 20th.
The dominant position of Bitcoin (BTC) reflects the percentage of the total valuation of the cryptocurrency market currently held by Bitcoin.
When the Bitcoin market rises in a bearish macro environment, it indicates that investors have shown lower risk preferences and are flocking to BTC as a safe haven investment.
This phenomenon was also observed after the outbreak of the war between Russia and Ukraine around February 24, 2022. Bitcoin's dominant position in the encryption market jumped from 44% to 48% within two weeks.
After the initial decline in prices caused by the war FUD, BTC prices surged 51% from $20200 to $30400 between March 10 and April 10, 2022, as cryptocurrency investors focused on the safe haven status of Bitcoin.
The above figure shows that the current situation of Bitcoin price increase and BTC trend is similar to the events after the war between Russia and Ukraine.
If history repeats itself, a 50% rebound in Bitcoin prices may break through the $40000 mark in the coming weeks.
Since the previous historical high, long-term holders have made significant acquisitions.
The transfer of a large number of BTCs from weak hands to long-term holders is another important on chain indicator that may further accelerate the sustained rise in Bitcoin prices.
According to key data points obtained by Glassnode, when Bitcoin prices peaked at $69000 in November 2021, long-term holders had 11 million BTC, while short-term holders had a supply of 5 million BTC.
Afterwards, long-term investors (blue line) purchased over 3 million BTC, and as of October 19th, their balance reached 14.89 million BTC.
Meanwhile, the supply (red line) of short-term traders has decreased by more than half, reaching 2.4 million BTC.
This vividly illustrates the large-scale transfer of wealth from the disadvantaged to more resilient investors over the past two years.
Wallets holding encrypted assets that have not been moved for more than a year are considered long-term holders.
The continuous increase in the number of long-term holdings of BTCs further confirms the global confidence in Bitcoin as a safe haven asset.
Due to the decrease in BTC controlled by short-term traders, this has resulted in artificial market scarcity.
Therefore, the further strengthening of Bitcoin's dominant position and overall market demand may accelerate the price increase to $40000.
BTC price forecast: $40000 target is feasible
From a chain perspective, the rising market dominance and long-term holder acquisitions may push the price of BTC further closer to $40000.
However, the global inflow/outflow data describing the current distribution of Bitcoin holders' entry prices highlights key resistance levels.
This indicates that the initial resistance of BTC near the $30130 area is quite important. As shown in the figure below, these 2.08 million addresses purchased 842330BTC at an average price of $30133.
But a decisive breakthrough of $30200 may open the door to a much larger increase than $35000.
However, if Bitcoin prices reverse below $25000, short positions may invalidate this bullish forecast.
However, the chart shows that 6.27 million addresses purchased 2.47 million tokens at the highest price of $26750.
If these wallets continue to be HODL, BTC prices may enter an immediate price rebound.
But if bears bypass the support buying wall, it may push Bitcoin prices down to $25000 for a long time.
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