Bitcoin

What is the Bitcoin bottom of the cycle according to capitalization models?

What is the Bitcoin bottom of the cycle according to capitalization models?

Bitcoin has traded sideways over the past few weeks. It is still consolidating between the $36,000 and $45,000 levels, liquidating both bulls and bears on several occasions.

With the current economic and geopolitical uncertainty, it would be wise to consider the worst case scenario and plan for it.

Technical analysis

By: Edris

The daily chart:

On March 7, BTC rebounded from the lower boundary of the range and broke above the 50-day moving average. The next day, it regained the momentum to retest and close below the 50 DMA average.

Today, Bitcoin has again tested this dynamic resistance but has so far failed to break it higher. Nevertheless, if the price is successful, the next significant resistance line would be the 100 DMA, which was only tested once in early December last year.

Above the 100-day moving average there is the upper boundary of the range, the $45,000 area. It has rejected the price four times since the start of 2022. On the other hand, if BTC is unable to break above the 50-day moving average, all eyes would be on the $36,000 support zone for see if it can drive up the price. once again.

Source: Trading View

The 4-hour chart:

On the 4-hour timeframe, it is evident that BTC is still consolidating in the bearish flag pattern, not hitting any of the trendlines for the third time. This structure confirms the continuation of the bearish scenario, in which only a bullish break of the upper trendline would disprove. Additionally, the RSI demonstrates a balance of power between the bears and the bulls at the moment, as it sits at the 50% mark, trying to rise above once again.

Source: Trading View

On-chain analysis

By: Edris

Bitcoin Capitalization Models

With the current economic and geopolitical uncertainty in the world, it would be wise to consider the worst case scenario and plan for it. The chart below includes different Bitcoin capitalization patterns such as market capitalization (black) and its 200-day moving average (yellow), realized capitalization (green), and delta capitalization (blue).

Source: CryptoQuant

Historically, the 200 DMA has been a reliable support in bull markets and strong resistance during bear markets. Thus, the areas above are generally considered bullish territory. The realized ceiling was also a reliable support in the first phase of the bear market. However, it tends to break lower for the final capitulation, and when the market breaks back above it, a bull (or mini-bull) market begins.

Finally, the Delta Cap marked the absolute bottom of the last two bear markets with great precision. Considering these facts and the chart demonstrated, it is evident that the area between Delta Cap and Realized Cap has been the best buying area for the past eight years. Currently, this price range would be $17,000 to $24,000.

It also seems that the time spent and the percentage of sampling below the ceiling achieved have decreased with each cycle. This steady decline could be explained by the growing adoption of Bitcoin, especially by institutional investors. More and more people are seeing the value of Bitcoin over time, and they are eager to allocate some of their wallets to “digital gold” when it seems cheap. These capitalization models would be useful in determining whether Bitcoin is undervalued or in a bubble.

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Cryptocurrency charts by TradingView.