-
The trader claims that 66% of the journey to a bull run is already achieved.
-
Bitcoin’s exchange balance supports Willy Woo’s optimistic outlook.
The recent recovery of Bitcoin’s (BTC) price over the past two weeks has taken place amid changes in its market, indicating a more favorable scenario compared to the past five months.
In a study, analyst Willy Woo mentions that a temporary bearish influx occurred in the market until early August. He attributes this to an increase in spot bitcoin exchanges, suggesting selling pressure, and a rise in “paper” bitcoin balances, indicating heightened speculation. However, as shown in the chart, these eventually declined.
It is important to clarify that “spot” refers to the balance of investors holding the digital currency, while “paper” pertains to balances recorded in derivatives like bitcoin futures. Thus, they serve as indicators of market movements.
“The price decline in early August led to a significant sell-off of ‘paper’ bitcoin, resulting in a wave of liquidations,” Woo explained. Indeed, this is evident in the reduction of open interest, which reflects the value invested in derivatives, as illustrated below.
“This indicates a healthy restoration of open value (paper bets),” the analyst stated. The rationale is that “it is quite challenging for BTC to rally amidst overheated speculation in the market,” he added. Hence, he is optimistic about the decrease in derivative investments.
According to his perspective, if the price action becomes considerably uneventful and the “trading casino” dissipates, bitcoin can then advance. In this regard, he believes that the market has already completed 66% of this journey, as much of the speculation has diminished, while BTC’s spot remains steady, as indicated by the green line in the initial graph.
He is confident that it won’t be long before factors conducive to a bull run for Bitcoin manifest. From a supply and demand standpoint, he observes a recovery from a short-term downtrend to a precarious neutrality, moving one step closer to a positive market sentiment.
Bitcoin is in a lengthy price consolidation
Regarding the long term, Woo highlights that the positive aspect is that Bitcoin is not in a bear market but instead undergoing an extended consolidation. In fact, as reported by CriptoNoticias, the cryptocurrency is experiencing its longest consolidation period in history, holding on to the historical highs of the previous cycle for the past six months.
According to the investment firm Capriole Investments, this phase of consolidation is comparable to gold’s performance in 2008, which led to a significant upward breakout. This process, which lasted nine months, took place before exchange-traded funds (ETFs) launched in the United States, instruments that debuted alongside bitcoin this year.
According to the analysis firm Alfa Bitcoin, the digital currency could have an upward effect in the next 30 days. The rationale is that it will be 150 days following the halving, a period during which it has historically shown a positive impact in past cycles.
Additionally, a reduction in interest rates in the United States is anticipated to prompt a shift from Treasury bonds to risk assets in September. This month also marks the start of autumn in the northern hemisphere, a season during which markets typically rise, creating a favorable scenario for Bitcoin as the year concludes.
Market Analysis: Bitcoin on the Path to a Bull Run
Key Facts
-
According to the trader, 66% of the path to the bull run is already completed.
-
Bitcoin exchange balance favors Willy Woo’s optimism.
The recovery of the price of Bitcoin (BTC) in the last two weeks occurs amid changes in its market, indicating a more favorable scenario compared to the previous five months.
In a recent investigation, analyst Willy Woo observed that until early August, there was a significant bearish sentiment in the market. He attributes this to an increase in spot exchanges, suggesting selling pressure accompanied by rising “paper” bitcoin balances reflecting heightened speculation. However, subsequent data shows these figures have decreased, indicating a potential shift in market sentiment.
The pink line shows the balance of spot and paper bitcoin. Source: Willy Woo.
The term “spot” refers to the balance of investors holding actual bitcoin, while “paper” refers to those recorded in derivatives such as futures. These distinctions serve as key indicators of potential market movements.
According to Woo, “The price drop in early August prompted a considerable sell-off of ‘paper’ bitcoin, leading to a significant round of liquidations.” This phenomenon is evidenced by the decrease in open interest, which reflects the value invested in derivatives, as seen below.
Open value in bitcoin. Source: Willy Woo.
Woo also noted that “This decline marks a healthy restoration of open value (paper bets).” This is crucial because “it becomes challenging for BTC to appreciate when the market is rife with exaggerated speculation.” His perspective is optimistic regarding this second wave of reduced derivative investments.
He suggests that if the price action remains stable and the “commercial casino” dissipates, it will enable bitcoin’s upward trajectory. Woo is confident that the market has traversed about 66% of this path, with significant reductions in speculation while the BTC spot remains relatively robust, illustrated by the green line in the preliminary graph.
Bitcoin’s Current Consolidation Phase
Considering the long-term outlook, Woo emphasizes a positive sign: Bitcoin is not in a bear market but rather in an extended consolidation. In fact, as noted by CriptoNoticias, the currency is currently experiencing its most prolonged consolidation phase, maintaining its historical highs from the previous cycle over the last six months.
Bitcoin price so far in 2024. Source: TradingView.
According to the investment firm Capriole Investments, this consolidation period resembles the performance of gold in 2008, which ended in a rapid upward breakout. This upward movement occurred after a prolonged nine-month period, coinciding with the launch of gold exchange-traded funds (ETFs) in the United States. A similar momentum is expected for Bitcoin as it continues to mature and attract institutional investments.
Potential for an Upward Trend in Bitcoin
In an analysis from Alfa Bitcoin, it has been suggested that Bitcoin could experience an upward impact in the next 30 days. This perspective stems from the fact that it will then be 150 days since the last bitcoin halving, a time frame in which previous cycles have exhibited significant gains.
Moreover, the anticipated reduction in interest rates in the United States this September is likely to trigger a shift from Treasury bonds to higher-risk assets like Bitcoin. Additionally, autumn in the northern hemisphere is historically a season of rising markets, creating a potentially advantageous landscape for Bitcoin as the year approaches its end.
Benefits of Investing in Bitcoin During Consolidation
- Lower Entry Prices: With Bitcoin currently in its consolidation phase, investors have the opportunity to purchase at relatively lower prices.
- Potential for High Returns: Historically, Bitcoin has experienced substantial gains following consolidation periods, making it a candidate for significant upside.
- Increasing Institutional Adoption: As more institutions enter the Bitcoin space, the demand for Bitcoin is expected to increase, driving prices up.
- Market Maturation: A consolidation phase typically leads to a more stable market, enhancing retail investor confidence.
Practical Tips for Bitcoin Investors
- Stay Informed: Regularly check market trends and follow expert analysis to make informed decisions.
- Diversify Investments: Avoid putting all your funds into Bitcoin alone; consider diversifying your portfolio with other cryptocurrencies and assets.
- Set Clear Goals: Define your investment goals and timelines to better manage your investments.
- Use Stop-Loss Orders: Protect your investments by setting stop-loss orders to minimize potential losses in volatile markets.
Conclusion
Bitcoin’s trajectory towards a bull run is supported by decreasing selling pressure and improved market sentiment. As analysts like Willy Woo point out, the key indicators suggest that investors may soon witness a significant upward trend. By understanding market dynamics, the concepts of spot versus paper bitcoin, and the potential for price increases, investors can position themselves strategically in this evolving landscape.
