Bitcoin Is About To Rally From Disbelief Phase: Analyst

The Bitcoin price has risen by greater than 28% since January 1, posting a powerful rally to start out the yr. The value movement has been driven by the worldwide financial market’s expectation that the U.S. Federal Reserve will proceed to slow its pace of rate of interest hikes before the pivot comes later this yr.

In keeping with Bitcoin on-chain evaluation pioneer Willy Woo, this has resulted out there now being within the “disbelief” phase of the cycle. Woo refers back to the chart below, which is generally used to explain market cycles in all financial markets, and said: “I think we’re within the “disbelief” phase of the cycle.”

Woo claims that BTC has already passed through the panic, anger, and depression phases, and is thus at the top of the cycle, and about to enter a brand new market cycle.

In the present phase, traders’ sentiment is dominated by the motto, “This rally will fail just like the others.” and “This can be a suckers rally.” An opinion that’s currently quite common on crypto Twitter. Once the phase of disbelief is over, hope for a possible recovery emerges.

Psychology of markets | Source: Twitter

Bitcoin On-Chain-Data Suggests Disbelief Phase

To support this thesis, the renowned on-chain analyst cites three key on-chain metrics, the primary being CVDD (Cumulative Value Days Destroyed). This, in keeping with its inventor Woo, has historically identified the underside of the market.

It relies on the idea that the market perceives a better floor when old coins (e.g., bought at $1,000) are passed on to recent investors (e.g., at $10,000). Within the chart, it could be seen that the CVDD Floor has been successfully defended for the reason that end of November, as Woo stated:

CVDD Floor (circa 2019) successfully defended for two months straight, the primary proper test other than COVID where the crash got close. Hope this will not be famous last words :). Spot momentum has been strong throughout this move, there was also solid accumulation for months at 16k.

One other indicator that Bitcoin has found its bottom is the associated fee basis comparison. The height discount that short-term buyers had over long-term buyers has peaked.

“It’s only on the deep parts of a bear market do short term coins get cheaper than long run coins,” Woo explained and shared the next chart.

Third, the analyst cites the BTC macro index, which signals a “pretty protected” time to purchase. “Have a look at the vertical bisection bands; we at the moment are about 1 month away from the period where the market’s reaccumulation phase starts to interact,” Woo says.

At press time, BTC stood at $21,119, leaving the worth stuck below the day by day resistance. A breakout above the $21,500 level can be crucial to construct confidence within the rally and dispel the idea that the recent move could be a bull trap.