While the price of Bitcoin has been relatively stable in the past days, hovering around the $66,000 price level, popular on-chain analyst Willy Woo shared his insights on the current state of the market. Woo highlights three potential bullish indicators and two bearish signals that could influence the price of Bitcoin in the coming months. Let’s break down these factors and see what they mean for you and the broader cryptocurrency market.
Here's the 5 macro signals I'm looking closely at right now for #Bitcoin.
3 bullish, 2 bearish…
— Willy Woo (@woonomic) July 23, 2024
Bullish Indicators
1. End of Miners Capitulation
Miners capitulation happens when Bitcoin miners, who validate transactions and secure the network, are forced to sell their holdings due to low profitability. This often signals a market bottom, as the selling pressure from miners decreases. According to Woo, the recent end of miners’ capitulation is a strong bullish indicator. Historically, this has been one of the most reliable signs of an impending price increase.
2. Recovery of Hash Rate
The hash rate, which measures the computational power used by miners to process transactions and secure the Bitcoin network, is on the rise. This recovery coincides with the introduction of next-generation mining hardware, such as the M66s and S21 Pros. Woo notes that the hash rate’s recovery typically precedes a price increase, as was the case recently when the price responded within a day of the hash rate’s uptick.
Puell Multiple Indicator
The Puell Multiple measures miners’ profitability by comparing current revenues to past revenues. Woo describes it as a “1-2 punch macro signal.” First, macro bottoms occur when miners’ profitability is at its lowest. Second, a significant bullish signal appears when a Bitcoin halving event reduces miners’ earnings by 50%, setting the stage for a bull run. We are currently at the second stage he notes, indicating that mining becomes more profitable, which bodes well for Bitcoin’s price.
3. Global Liquidity Expansion
Global liquidity is an important factor, which refers to the availability of money in the financial system. Traditional finance (TradFi) institutions tend to buy risk-on assets like Bitcoin when liquidity expands, typically due to central banks’ money printing. Early signs suggest that global liquidity is increasing, providing another bullish setup for Bitcoin.
Bearish Indicators
1. Increase in Coins Entering Spot Exchanges
One bearish signal Woo points out is the build-up of Bitcoin entering spot exchanges. Recently, 50,000 BTC from the Mt. Gox rehabilitation process was sent to Kraken, causing concern among investors. This influx of Bitcoin into exchanges can increase selling pressure, potentially driving prices down. Selling pressure is when a lot of people are trying to sell their Bitcoin at the same time. This increases the supply of Bitcoin available in the market. When there are more sellers than buyers, the price usually goes down because sellers might lower their prices to attract buyers.
2. Launch of ETH Spot ETFs
Another potential bearish factor is the recent launch of Ethereum (ETH) spot ETFs. Some capital that is currently invested in Bitcoin ETFs might rotate into these new ETH ETFs. While it is difficult to estimate the exact impact, this shift in investment could create downward pressure on Bitcoin’s price.
Woo sees a “tug-of-war” between bullish and bearish factors influencing Bitcoin’s price. However, he believes the bullish factors outweigh the bearish ones. In the short term, Bitcoin needs to break the $73,000 mark to trigger a short squeeze to $77,000. Beyond that level, there are no significant barriers to further price discovery. At the time of writing, Bitcoin is moving hands at $65,808 according to CoinMarketCap data.