Bitcoin continues to consolidate below $9,200, but bullish sentiment grows

The Bitcoin price has been stagnant below $9,200 for a while now, but on-chain data, investor sentiment, and Bitcoin’s strong quarterly performance all show signs of late bullishness.

Despite the shocking drop in Bitcoin prices to $3,750 on March 12, Bitcoin still achieved its strongest second quarter performance in history. According to Skew data, Bitcoin's return rate so far in the second quarter of this year is 42.39%; and Bitcoin's overall return rate in 2020 is still 27.31%, still the best performing asset in the world in 2020.

At the same time, we found through on-chain data provided by Glassnode that since the Bitcoin crash on March 12, the number of Bitcoin whale accounts has exceeded the 2017 high and reached 1,800 in the past three months.

In addition, a recent market survey by cryptocurrency custodian Bitcoin IRA showed that 43% of customers on the platform expect the price of Bitcoin to exceed $15,000 by the end of 2020. This is also considered a positive signal reflecting investors' sentiment towards the Bitcoin market.

Moreover, the survey also showed that 57% of users confirmed that they bought and held Bitcoin as a long-term investment. These data all highlight the growing bullish sentiment on Bitcoin prices.

Judging from the K-line chart, the Bitcoin price is still between the median line of the descending channel and the 20-day moving average, which means that the resistance level between $9,200 and $9,550 is still an obstacle that needs to be overcome first.

The Bollinger Bands data for the 4-hour and daily charts also show that consolidation is currently underway. Moreover, although Bitcoin’s trading volume remains sluggish, Bitcoin is forming higher lows on the daily chart.

In addition, Delphi Digital recently pointed out in a Bitcoin market report to its clients that over the past month, Bitcoin prices have been fluctuating in a relatively narrow range, but the 30-day volatility of Bitcoin prices has dropped to its lowest level this year. Historically, as trading volume picks up, this sign is generally a precursor to large price fluctuations.

The report also noted that as Bitcoin price consolidates between a key overhead resistance level and a crucial support zone, intraday volatility has declined, suggesting that a strong directional move is imminent.

Since the COVID-19 pandemic caused a sharp correction in global stock markets in early March 2020, Bitcoin price movements have also shown a strong correlation with traditional market movements. Bitcoin prices subsequently rebounded strongly from $3,750 to $10,350, and the S&P 500 and Dow Jones indices also showed a similar recovery trajectory.

Of course, cryptocurrency investors are also very interested in whether the short-term correlation between asset classes will hold, or if a decoupling will occur.

Kevin Kelly, a market analyst at Delphi Digital, said that historically, when the S&P 500 index rose by 15% or more in any quarter, the performance in the next quarter was also up when the same situation occurred in the past 80 years. So next, the performance of the S&P 500 index in the third quarter of this year is also a data worth paying attention to. Especially if you expect Bitcoin to continue to align with riskier asset classes in the short term.

Regarding market volatility within the stock market and its impact on Bitcoin price action, Kelly explained that if stock market volatility remains high (or above historical averages), then I expect the correlation between stocks and Bitcoin to remain relatively high as well. For example, historically, large spikes in the Volatility Index (VIX) have coincided with large-scale sell-offs in Bitcoin. Therefore, if we do see another significant drop in the stock market, I expect Bitcoin to be affected in the short term as well.

A common view in the market is that if the $8,800 support level is broken, the price of Bitcoin may re-touch recent lows in the coming weeks. Despite this short-term bearish tendency, Bitcoin's market structure and bullish investor sentiment indicate that Bitcoin is likely to see a new round of rebound in the third quarter.