Bitcoin [BTC] Price Analysis – Monthly Returns

With the beginning of a new month, the sentiments of cryptocurrency traders are running high with the surge in farm yields and token prices on DeFi platforms. Bitcoin [BTC] has been ranging between $11,000 and $12,000 for the past few weeks. The current possibilities point bullish towards 2019 highs, or a deeper correction up to $9,500. 

The Volume Profile indicator in the chart above denotes that the price is in the area of largest volume interest at the moment. A break below the $10,500 area could drive the prices to a lower range between $8,500 and $10,000. Nevertheless, the upside is likely to be more violent that the probable downside. 

Supply-Side Analysis 

On the supply side, September is the last month of the rainy season in China. For the next months, the electricity cost in the Sichuan region for mining will increase by about 20-30%. Due to the movement of some miners, we’re likely to see a dip in the hash rates which could ensure a short-term miner liquidation.

The indicator below depicts the 30 and 60-day average total hash rate on the network. The vertical ribbon in May marks the halving. In mid-July, the positive cross of the 30 and 60-day average along with the 10 and 20-Day Moving Average signalled a buy. Currently, the average hash-rates are moving close indicating a slow-down in the surge since halving.

A bearish move in price could result in less profitability for miners and lead to shutdown for weak miners.

Resistance and Support

Bitcoin [BTC] broke above the resistance from the descending trendline last month in July. The break-out above resistance on a monthly scale provides confirmation of the beginning of a positive trend.

Nevertheless, a possible long-term bullish view includes a test of the trendline again around $9500. This is consistent even with the previous bull cycle of 2016-2017 when there were considerable pullbacks of nearly 30-40%. The current local high in Bitcoin is at 12,475, a 30% pullback targets price as low as $8732.5.

The weekly TD sequential count is currently on a positive 6. Hence, we expect a bullish continuation in the beginning half, followed by reversal towards the end of the month.

Historic Returns

The average monthly gain in August and September is 5.88% and -2.27%. In the last eight years, September has had a negative monthly closing in five on them. Nevertheless, on the years when halving took place, the gains were positive to the tune of 20.2% (in 2012) and 6.5% (in 2016).

The monthly closing for Bitcoin is near its end and the 30-Day volatility in Bitcoin just over 2%. Moreover, the annualized volatility in Bitcoin [BTC] in September in the last two years have been considerably low following the highly volatile summer months. Could Bitcoin be settling down for another quieter fall?

Futures Market

The weekly chart on CME is indicating a resistance from the long-term S&R trend line. The horizontal support from the $11,225 line is critical for the bulls, it is rejected it once and could continue to test the trendline yet again. A break-out and confirmation above it would be really bullish leading toward ATH at $20,000.

The probable short-term movement of the futures prices could pivot around the horizontal support making a break towards the upside or a retest of the trendline. 

The futures prices in Contango indicate that the market is bullish. The Open Interest on BitMEX and Okex is above $1 billion each for Bitcoin perpetual contracts. The Open Interest on Ethereum [ETH] perpetual is around $350 million each on OKex and Huobi and $211 on BitMEX.

Expert View

In an elaborate Twitter thread from on-chain and trend analysis, Willy Woo, suggested last week that Bitcoin [BTC] might experience a brief period of correction inside a long-term bullish trend.

While the Open Interest and Volume on the CME and other futures platforms are strong, the GAP analysis points at a sweep of the $9,500 area. Woo notes, 

This is the CME gap on the daily chart. It has so far had a 100% backtrace of filling.

But also note the CME is quite new and certainly was not around in 2016 when we had a similar stage in the macrocycle.

Moreover, he also suggests that the pullback could be deeper for altcoins favouring Bitcoin dominance in the next few weeks.

Nevertheless, the DeFi yields and hysteria is running high at the moment looking forward to higher participation. The DeFi market expansion has been exponential, leading to hefty gains in their governance tokens. The size of the liquidity pools is increasing as well. This puts an upward buying pressure on Ethereum. The profits for these projects usually flow back into Ethereum and Bitcoin which looks fundamentally bullish.

Furthermore, with the long-term bullish view still intact, the pullbacks are likely to be bought back quickly if reference from 2016 bull-cycle is taken as reference.