2023-2024 Cryptocurrency Trend Outlook: Exploring Bitcoin’s Bottom and Market Trends

The crypto market has fallen sharply recently, and the market is paying close attention to the future market. This article mainly discusses three questions: Where is the bottom of Bitcoin ? What are the major events that will affect the direction of the crypto market in the rest of this year and next year? And what noteworthy information can be obtained from the dimensions of on-chain data and Bitcoin halving cycle.

Where is Bitcoin's bottom?

On August 17, Bitcoin plummeted, and BTC fell below the 200-day and 200-week moving averages (from a technical analysis perspective, MA200 is an important bull-bear dividing line). This article previously pointed out in the article "Why is the $30,000 pressure level so important? XRP may serve as the flag bearer in the next bull market": "The reason why Bitcoin is important at $30,000 is that it is likely to be the bull-bear dividing point; if it effectively breaks through the previous high, it will enter the early stage of the bull market, and if it cannot effectively break through, it will still be in the tail of the bear market." Facts have proved that although from a technical analysis perspective, BTC standing on MA200 can be considered a sign of the start of a bull market, the price that can truly be considered the bull-bear dividing point in this round is still $30,000. This view is still valid, and let's focus on the bottom price of Bitcoin in the bear market.

According to BitPush, Galaxy Digital pointed out in an article that $25,000 is a key level to watch because it has served as a technical support and resistance level many times as early as May 2022, and Bitcoin's flash crash on Thursday (August 17) found support here. This level also stands out when looking at the Bitcoin supply on the chain. 22% of the Bitcoin supply changes hands between $25,300 and $31,575.

According to Bitpush, a crypto market trader also wrote that under the stock market structure, a decline is usually the most common way for the market to recover volatility, especially when the logic of rising is destroyed. There is almost no doubt that the market will fall after a long period of trading. Although Bitcoin has seen an obvious technical break, the trend of the change is likely to look for a new range of shocks downward, rather than a unilateral decline. Since the long-term vitality of the bulls was hit hard in this spike, the market may need to experience a long period of shocks after the downward change before it can rebound properly. This adjustment is the last wash before the new round of market starts. Against the backdrop of the regular army PayPal announcing its entry into the stablecoin field and the increasing approval of Bitcoin ETF, the current decline is very similar to the historical situation of "reversing to pick up people" before institutions enter the market.

Overall, the above two analyses basically believe that Bitcoin is not far from the bottom and the consolidation period will be relatively long. This article is basically the same as this view, the difference is mainly in the bottom price and time of Bitcoin. This article believes that the main support of BTC in this round should be around $23,300.

In fact, the data of miners is the most valuable reference for judging the bottom of Bitcoin. Assuming that we regard Bitcoin as a commodity, the average cost price of miners can be considered as the ex-factory production price of the commodity, so the support at this position will be the strongest. Observing from the Glassnode data, the average cost price of miners shown by the Bitcoin: Difficulty Regression Model indicator is around US$23,300. This indicator regards the difficulty of Bitcoin mining as the final refinement of the mining "price" and uses one number to explain all mining variables. Therefore, this value reflects the average production cost of mining for BTC. This indicator does not need to consider the mining equipment, electricity costs and other factors.

Which major events will affect the market trend this year and next year?

As Bitcoin begins to enter the financial industry and traditional financial institutions begin to get involved in the crypto business, the macro market has an increasingly close impact on Bitcoin. However, Bitcoin does not completely follow the macro market, so how should we view the relationship between the two?

This article believes that the cyclical regulation of the Federal Reserve is an external factor for Bitcoin, and the cyclical effect of Bitcoin's own halving mechanism is relatively more internal; at present, the internal cyclical nature of Bitcoin is stronger than the external cyclical influence. If the internal and external cycles are synchronized, then the cyclical effect of Bitcoin will be more obvious; if the pace of the two cycles conflicts, then Bitcoin will mainly reflect the characteristics of the internal cycle, but its cyclical effect will be weakened. Although Bitcoin has already stood on MA200 this time, many Wall Street institutions have entered the crypto market, such as Paypal, but the hawkish signal of the Federal Reserve is still strong, and the overall liquidity of the financial market has tightened, which is why Bitcoin cannot go too far.

The main events that may have an impact on the crypto market this year include: 1) the SEC's ruling on the motion to dismiss the Coinbase case and the progress of the SEC's series of cases against Binance; 2) the U.S. House of Representatives is currently considering formulating a formal bill on regulating the crypto market and the issuance of stablecoins; 3) the risk of a bond market collapse and the Federal Reserve's interest rate hikes, etc.

On the whole, if we refer to the lawsuit between the SEC and Ripple, it is expected that the lawsuit between the SEC and Coinbase and Binance will not have a result soon; the matter of US lawmaking is not expected to be passed quickly considering the efficiency and bipartisan politics of the United States; as for the Fed’s interest rate hike policy, the probability of a shift is currently low, and liquidity cannot be ruled out from further tightening, which is also a macro factor that may lead to further decline of BTC.

The major events that will have a profound impact on the crypto market in the first half of next year include: BlackRock 's ETF application will probably have a result in the first quarter of next year; the Fed's interest rate hike cycle will probably turn around in the first or second quarter of next year; Ethereum's Dencun upgrade is currently expected to be completed at the end of the year, and Layer2 is expected to usher in a technological explosion in the first half of next year. Therefore, from a macro perspective, we are more optimistic about the trend in the first half of next year, which is also in line with the cycle law of the Bitcoin bull market starting after the halving.

What information does on-chain data and halving cycle release?

Finally, this article further verifies our judgment from the perspective of on-chain data and cycles. Observations from Galaxy’s data:

The percentage of Bitcoin supply that has not changed in more than 3 years is hitting a new all-time high of over 40%. Long-term holders continue to increase their holdings and hold them longer. This is also why we think it is difficult for Bitcoin to fall further significantly.

From the Bitcoin Entity-Adjusted LTH-NUPL indicator, the left side of the 2014-2015 bear bottom had 62 days of red columns; the left side of the 2022-2023 bear bottom had 63 days of red columns. The right side of the 2014-2015 bear bottom had 192 days of red columns; the right side of the 2022-23 bear bottom has 149 days of red columns. Compared with the right side of the 2014-2015 bear bottom, the 2023 BTC bull market may start to peak in the fourth week of September. (Note: The upper indicator in the figure is the BTC price; the lower on-chain indicator is BTC: Entity-Adjusted LTH-NUPL. When the indicator is >0.25 and less than 0.5, it is marked with a red column.)

Summarize

Overall, Bitcoin is still in the tail of a bear market. $25,000 will be a strong support level, but the bottom of the bear market is around $23,300. Due to severe selling pressure, Bitcoin is expected to fluctuate for a period of time. $30,000 above is still the dividing line between bull and bear markets. If it effectively breaks through $30,000, it will basically confirm that it has entered a bull market. From a macro perspective, the overall market is expected to perform poorly this year, but the market will be better in the first and second quarters of next year.