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Flat Market Lets Mid-Caps Run, Bitcoin Prepares Bullish Breakout

17 Jul 2020   #Bitcoin

The broader financial market continues to fend off another Black Thursday style collapse or second-leg down scenario. And although the return of risk appetites hasn’t helped Bitcoin break free from its tight trading range, altcoins across the crypto market have been highly explosive. 

One superstar altcoin has set a new all-time high and keeps climbing, helping the altcoin market shine against a stagnant BTC.

Metrics across the Bitcoin space continue to decline despite prices staying afloat. On weekly timeframes, Bitcoin price may have found support and is gearing up for a bullish advance and potential breakout. A boost in Bitcoin would take the asset’s two-year performance ahead of gold, giving more credence to the safe haven narrative that has faded since the mid-March market selloff.

All other signs in Bitcoin point to a healthy network supporting the crypto asset, all that’s left is a bullish breakout, and Bitcoin’s next bull market could finally be here. Bitcoin Weekly Price Action Finds Support, Potentially Turning Bullish Ahead of Breakout

Bitcoin price action has been boring over the last several weeks, trading sideways in a low volatility, coiling trading range. The ongoing contraction has sent crypto traders to altcoins and the stock market where there are more current opportunities. But while this goes on, Bitcoin may be confirming resistance as support on weekly timeframes, and building a base at which to make a strong bullish impulse higher from.

Data shows that when volatility drops this low, a 50-70% move in Bitcoin price can result. The asset may retest $8,700 before any upside continuation occurs. However, considering the pent up momentum, a breakdown to $8,700 may not stop there.

Bitcoin will need to break and close above $10,000 and continue from there to keep hopes for a new bull market alive. Trading Volume and Volatility Continue to Decline in Crypto Market, Sentiment Remains Neutral. The lack of any exciting price action in BTCUSD markets is causing trading volume to trend downward, continuing the descent that began in April following the Black Thursday collapse.

The low volume environment has also kept the notoriously volatile cryptocurrency asset dropping in the key metric. Volatility continues to set new low after low, according to the 30-day and 7-day averages, as well as Bollinger Band Width – another tool used to measure volatility.

The flat trading environment has also meant very few fluctuations in sentiment. Without wild moves causing the herd sentiment to change like the wind, traders are simply confused, and remaining fear from Black Thursday and the pandemic uncertainty has the Fear and Greed Index tracking just below neutral.

Chainlink Sets Record High, But Mid-Cap Altcoins Outperform The Rest. While Bitcoin does its best impression of a stablecoin, altcoins everywhere are ripping in one direction or another. Previous top performer Compound has corrected heavily. Meanwhile, crypto market superstart for the last two years running Chainlink, has set yet another all-time high. And another. And another. The asset is in full price discovery mode, setting a new record with each passing day. The asset may be ready to peak, however, according to the TD Sequential indicator. The asset is up over 300% year to date, leaving much profit to be taken. Outside of Chainlink, mid-cap altcoins dominated the crypto market over the last week.

Thanks to strong performance from ADA, DOGE, VET, and other mid-cap coins, the mid-cap altcoin index vastly outshined Bitcoin and the rest of the crypto cap indices.

Safe Haven Narrative Reaches Crossroads, Two-Year BTC Performance Comparable To Gold

Bitcoin has many narratives: store of wealth, safe haven asset, global reserve currency replacement, an answer for everything. The safe haven narrative helped fuel Bitcoin’s rally in 2019, but the asset went parabolic, then later overcorrected. Meanwhile, gold has had stable and steady gains over the last two years.

Looking at the past two years of performance, Bitcoin and gold are neck and neck, yet investors in the precious metal wouldn’t have had nearly as wild and explosive of a ride to the same ROI.

The volatility in Bitcoin resulting in the same returns in the same timeframe, is damaging to Bitcoin’s safe haven narrative. A safe haven must be stable for investors to feel safe storing wealth in the asset, and Bitcoin’s unpredictability and instability makes for an uncertain investment that is no haven at all.

It’s now or never for Bitcoin to prove itself against gold and cement the digital gold status, or tarnish it forever. The asset may be trading sideways and investors in the asset class are feeling uncertain, the underlying network is as healthy as ever in Bitcoin. The Bitcoin network hash rate has achieved a new 7-day average all-time high, showing that not only was a miner capitulation hash rate death spiral avoided, the network is chugging along well.

Bitcoin sidechains are also gaining traction. The Liquid Network launched by Blockstream in 2018 has recently grown by over 413% since the start of the year. Growth has also returned to the Lightning Network, a second-layer payments protocol for Bitcoin. After an initial phase of adoption, things leveled off, but have since returned to positive uptick in usage and adoption. Despite all of this, tokenizing Bitcoin as an ERC20 token on Ethereum has become extremely popular. 

There are now over 14,000 BTC tokens on Ethereum, ranging from HBTC, to WBTC, to renBTC, and more. Off-chain BTC on Ethereum is outpacing both Lightning and Liquid combined.

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