Bitcoin is seeing a narrowing on the price charts, what could be the outcome

by James · October 22, 2022

Disclaimer: The information presented does not constitute financial, investment, trading or other types of advice and is solely the opinion of the author.

Technical indicator showed volatility at an almost 2-year low
Will the $19,000 support be crushed in the coming weeks to send BTC bulls reeling?

USDT dominance, a measure of Tether’s crypto market cap, has been on the rise since mid-August. This was a signal that market participants preferred to hold the stablecoin rather than a crypto asset. Bitcoin has been holding on to the $19,000 support in recent weeks, but it has been too steadily approaching four-month lows.

Here is AMBCrypto’s price estimate for Bitcoin [BTC] for 2022-2023

Indirectly, it was also a signal of the bearish sentiment across the market. News of inflation and rising interest rates are choking the money supply for risky assets like Bitcoin, and recovery could be months or even years away.

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Bollinger bands signal a massive squeeze in progress

Bitcoin sees contraction, watch out for high volatility

Source: TradingView

Since June, BTC has traded within a range from $24.4k to $18.6k. The low of this long-term series has been tested several times since September. Each retest produced a weaker response than the previous one.

This is likely to see buyers exhausted in the upcoming retests and BTC could crash right through the $17.8k and $17k support levels. How much further south can it go? It was a scary thought for the bulls, but $16.2k could be a doable goal.

The Relative Strength Index (RSI) has met resistance at neutral 50 and simply failed to climb above it in recent weeks. On-Balance Volume (OBV) was also in decline since mid-September, showing that selling pressure has been the most dominant force.

The Bollinger Bands width indicator reached a low of 0.07 on the daily chart, a value it previously reached in October 2020. While it was followed by a slow, massive rally, the current contraction of Bitcoin may have a different flavor.

The exchange offer reached new lows

Source: Sentiment

The offer on exchanges has fallen throughout the year. This showed that coins were being moved out of exchanges and into private, probably cold wallets. This was probably a sign of accumulation. The last time the exchange rate had been this low was in November 2018.

The dormant circulation saw a big spike a few days ago. The same chart showed that this was a BTC move outside the exchanges. Since July, the dormant circulation has been fairly minimal for the most part and has not witnessed any large waves.

Hash rate on the rise, but profitability is not

Source: Blockchain.com

Throughout all these months, the Bitcoin hash rate has been going higher. This was a positive result, as the network was more secure against 51% attacks. At the same time, the BTC miner’s profitability also fell. It was near the October 2020 lows of $0.066/day per 1THash/s.

Will miners eventually cave in and be forced to sell their BTC? Or has the accumulation in recent years reduced the risk of a new capitulation event? Only time will tell, but somehow something has to give.