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A key indicator of Bitcoin price momentum has just fallen to its lowest level since March.
Bitcoin’s Z-score against its 200-day moving average dipped below 1.0 last week, but has remained close to that level ever since.
This means that the current Bitcoin price is just 1 standard deviation below the average daily closing price over the past 200 days.
Bitcoin’s Z-score against the 200 DMA was 2.27 this time last month, just days after Bitcoin hit a year-high above $31,000.
The loss of bitcoin price momentum in recent weeks has prompted traders to take profits following this year’s impressive rally and how much bitcoin will rise further for the rest of the year as uncertainty over U.S. cryptocurrency regulation persists. This is because it tempers optimism about whether Outlook and how much if the Fed cuts in the second half of this year.
Bitcoin’s high transaction fees are also weighing on its price, perhaps as demand for blockspace soars amid the growing popularity of the new BRC-20 standard for crypto tokens issued directly on-chain.
This certainly acts as a deterrent to the more traditional uses of blockchain as a digital currency ledger. The number of daily active users and the number of new addresses interacting with the blockchain each day have both fallen off a cliff in recent weeks. soared to all-time highs.
Is now a good time to buy?
There is no guarantee that the Bitcoin price will not need to fall further in the short term, but if the cryptocurrency is doing well, a 200DMA Z-score of just under 1 would be a good place to buy Bitcoin. It is often time. We believe we are in the early stages of the middle of a bull market.
Take the 2015-2018 bull market as an example.
The line that marks the Bitcoin price one standard deviation above the 200 DMA appears to have served as a strong level for several years.
That wasn’t so true in 2019 and early 2020, when Bitcoin recovered from the 2018 bear market, but in late 2020, when the Bitcoin bull market overheated thanks to massive fiscal and monetary stimulus. seems to fit.
Given the current Bitcoin market and underlying context, the recent return of 200DMA’s Z-score to just below 1.0 could be a medium- to long-term buy signal.
That’s because the macro environment is expected to become more favorable for the rest of the year. Interest rates in the US seem to have peaked, and local banks are still in trouble (creating safe-haven demand for “hard money” like Bitcoin and gold). And inflation is getting back under control (giving the Fed room to finally start cutting rates).
Meanwhile, an array of technical and on-chain indicators, as well as an analysis of Bitcoin’s long cycle, all point to the cryptocurrency entering the early stages of a new bull market.
The short-term bearish forecast of a retest of the critical long-term support in the $25,000s is likely to come true. Bitcoin appears to be in a short-term downtrending channel, still below the 21-day and 50-day MAs.
However, many long-term Bitcoin investors and bulls are likely staying on the sidelines to jump at the chance to get their hands on Bitcoin at $25,000.