Bitcoin’s fall from glory could have been foreseen, BUT does its future look any good

As another crypto ban occurred in China recently, the worldwide crypto-market fall triggered market-wide selling. Bitcoin slipped below $42,000 and was down by over 3%, over the past 24 hours. While China’s central bank declaring crypto-related business illegal was one macro-event that triggered the fall, the market had been showing signs ever since the flash crash happened. 

The signs before the drop 

Notably, Bitcoin’s price started making a series of lower highs from the $50K psychological resistance level, which reflected a slowing down of the upside momentum, throughout this month. Further Relative Strength Index (RSI) on BTC’s daily chart noted a sharp slope, indicative of selling pressure creeping in. 

A look at Bitcoin’s Spent Output Profit Ratio (SOPR) revealed that a noticeable downtrend in SOPR had started from August 14, wherein SOPR started to make lower peaks. The SOPR provides an insight into the macro market sentiment, profitability, and losses taken over a particular time frame. It further reflects the degree of realized profit for BItcoin moved on-chain.

Notably, SOPR’s value dropped below 1 for the first time, since July 27 at the time of writing, this meant that the coins moved on average had started selling at a loss. 

Source: Glassnode

 Further, Bitcoin addresses with non-zero balance started noting a downtick since September 13, while its new addresses which were in a continued downtrend started falling September 7 onwards. This was indicative of a lowered number of new participants in BTC’s market. Nonetheless, even though these metrics highlighted a bearish picture for the top coin alongside falling prices, not all hope was lost for Bitcoin. 

BTC’s boat will sail 

Despite the recent price volatility and sudden drop in Bitcoin’s price, Spot Reserves continued to decrease. When looking at the long-term picture, a decrease in Spot Reserves could likely push the upward price trend. Further, while there were big inflow spikes after the crypto ban news from China, outflows also spiked briefly which could, in turn, mean that some investors bought the dip and anticipate higher prices soon. 

Source: CryptoQuant

That being said, as Bitcoin oscillated around $42,800 at press time, it saw close to 2% gains in just two hours. Additionally, the 100-day moving average at $40,000 could provide a short-term price cushion and is likely to act as a strong support. However, quick recovery in the short-term seems unlikely looking at BTC’s price making lower lows on a shorter time frame. 

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