Bitcoin remains range-bound after a brief weekend rally gave bulls false hopes of news highs. The first cryptocurrency by market cap has been trapped in the $48,000 to $50,000 region since last week.
The price action has investors puzzle, as the bullish momentum reached its peak, at least, for the short term.
Analyst Ben Lilly from Jarvis Labs recently published a report on the crypto market. As seen below, in the Bull-Bear Cycle index developed by Jarvis Labs, the “fair value” indicator, the orange line in the chart, dropped below the blue line around May 2021.
This suggests that the market remains on a bearish trend. Although in July there was a surge in the orange line, signaling bullish momentum, it remains below the blue line.
This indicates that BTC’s price “has yet to fully recover”, the analyst said while adding, that it “still has some ground to cover before bitcoin is in a full-blown bull market.”
In addition, Jarvis Labs tried to find correlations between Bitcoin and its supply circulation levels, meaning the percentage of coins being exchanged. This measures BTC’s liquidity.
As seen below, in the Price versus Circulation Ratio, show with the pink line, at the end of 2020 the percentage of Bitcoin exchanging hands increased to late 2017 levels, when BTC’s price hit $20,000.
This led the first cryptocurrency by market cap to a massive rally that peak at $64,000. However, the circulation ratio (pink line) started to decrease as the market entered 2021 and it’s currently signaling a “sell” (red line).
Thus, the indicators suggest a possible new assault from the bears in the short term. Ben Lilly believes that there are “some” similarities with the current price action and the 2013 bull-run but is uncertain that Bitcoin could make an equally powerful moved to the upside. The analyst claimed:
What I find interesting here is it coincided with the last attempt of reclaiming a new high. Which means if bitcoin fails to make a new high in the next month we might be in trouble.
Why The Bitcoin Bulls Could Face Trouble To Return To Previous Highs
In support of the bulls, Ben Lilly indicated that there has been a lot of Bitcoin accumulation as the cryptocurrency moved from its lows at $30,000, over the past months.
These investors are trading spot as suggested by funding rates in the BTC futures market. Unlike the previous rally that led BTC’s price to a new all-time high, this time funding rates are neutral.
As a consequence, the market is less susceptible to a “cascade of liquidations” that could precipitate a sudden dropped. However, Bitcoin whales are currently battling to determine which side, bullish or bearish, will dictate future price actions.
At the moment, the analyst said, indicators seem to be on the bears’ corner. Bulls must keep BTC’s price above key levels of support and hold their ground in case of a new bearish attack. Ben Lilly said:
To sum it up, the market is not convincing me a new ATH is in the cards right now. I would like to see bitcoin stay above the 200d MA (around $45,000). And if it does retest it, I’d like to see a strong bounce off it to at least $53k.