Overhead resistance levels continue to constrict Bitcoin price expansion, leading some analysts to forecast a brief sweep of the $27,500 level.
After a spectacular first half of 2023, the price of Bitcoin (BTC) appears to have stalled out, being stuck between $29,000 and $31,500.
There could be reason to believe that in the near term, the price of Bitcoin will tend to trade sideways or to the downside. This thesis can be based on three factors, with two of them involving technical analysis and the third involving fundamentals.
Bitcoin price resistance at $32,000 has been holding strong
Charles Edwards, founder of Capriole Investments, recently released a market update in which he notes the significant resistance Bitcoin has failed to break through at the $31,000–$32,000 level:
#Bitcoin looks to have a fair chance of dropping to around $27.3k where there is a confluence of both:
1. a strong support range of previous price action (orange rectangle)
2. where the 200 weekly MA (pink) acts as support.
3. The 200 daily MA (blue) isn't far behind either.… pic.twitter.com/aDHDMqvW7U— Colin Talks Crypto (@ColinTCrypto) July 19, 2023
For the past month, BTC/USD has been holding within a tight consolidation range. Support for this range appears around the $29,500 level. A daily close beneath support could open the path to a further move downward toward $27,500.
However, volumes have been declining, suggesting that perhaps the recent spike downward could be less bearish than it seems. If volume picks up amid another pullback, the bears could easily take control of the market.
Bitcoin network fundamentals have floundered
The Capriole Investments report cited earlier emphasizes that “price is only half the picture.” Fundamental factors also come into play. Among those most worth considering might be metrics that pertain to questions such as:
- What’s happening with on-chain flows?
- How are investors allocating capital?
- How does overall market sentiment and the macro environment impact Bitcoin?
- Is network security growing?
The Capriole Bitcoin Macro Index is an aggregate measurement of 40 fundamental Bitcoin variables, including on-chain, macroeconomic and equity market metrics. All factors have been combined into a single machine learning model.
The report concludes:
“The Macro Index today remains in a period of relative value (below zero), suggesting decent long-term value for multi-year horizon investors. However, the Index just re-entered contraction. On-chain and macro fundamentals have started to trend down following a 7-week period of recovery which started at $26K in early June.”
Bitcoin’s long-term bull thesis is still in play
Despite these near-term bearish developments, there’s little reason to be concerned long-term. The next halving event is less than a year away, and positive news keeps flowing in.
Perhaps most importantly of all, the hash rate has risen by 50% in the last six months alone. This suggests that the Bitcoin network is stronger than ever and continuing to grow at a lightning-fast pace.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.