Chart for BTC/USD (1W)
Bitcoin (BTC) is currently trading just above $6,400. The average cost for mining one Bitcoin (BTC) lies slightly below this level between $5,800 and $6,200. This is the reason the price has managed to stay above those levels for now despite the fact that the volume is so low that a couple of million dollars could swing the price either way. If this had been a currency pair, for instance EUR/USD or GBP/JPY or a stock, there would be no debate regarding the actual and perceived value. This would be because most of the stocks or forex pairs are traded online, the volume generally speaking, is high and the price does reflect the actual value of the asset at the time. Sure, there can be manipulation or things might change long term but everything is on the table, most players are into the game and the value of that asset is ascertained based on majority opinion.
This is not true of Bitcoin (BTC) and most cryptocurrencies where most of the coins are held in cold storage. A recent report by Diar Research stated that more than 55% of Bitcoin (BTC) belongs to wallets with balances of over 200 BTC. Interestingly enough, one third of these wallets have never made an outgoing transaction according to the report. Certainly, there might be some lost wallets but the majority comprises of functioning wallets the holders of which are so confident in the value of Bitcoin (BTC) that they did not even bother to sell when the price peaked in December 2017. If each of these accounts holds no less than 200 BTC that is a valuation of at least $4,000,000 during the previous high. If this had been any other market, investors would have jumped to sell some and take profit. If they did not sell during all this FUD and negativity and not before to take profit, it means that they are not interesting in selling at all. It means that the big players in this space believe that Bitcoin (BTC) will ultimately replace fiat currency and therefore it makes no sense to be valuing Bitcoin (BTC) in fiat. Remember, the key word here is outgoing transactions. These wallets did not sell but that does not mean they did not accumulate more when the prices hit the bottom. In fact, a recent report by TABB mentioned that the OTC market is a lot bigger than the volumes we see on Coinmarketcap. Billions of dollars are changing hands on a daily basis as big money buys Bitcoin (BTC). It does not impact the price at this level because most of it is happening over the counter. However, the big picture is very clear when you connect the dots to see where things are headed.
The number of shorts on exchanges like Bitfinex and Bitmex has reached their all time highs. They are now on the verge of a sharp decline. The above weekly chart for BTCUSDShorts shows that the number of shorts is trading in a rising wedge, which is a strongly bearish indicator. We can already see a red candle forming as the price nears resistance. If the number of shorts falls at this stage, they risk breaking the rising wedge which will prove to be catastrophic for the bears.
On the other hand, the number of longs has been in a falling wedge. The above chart for BTCUSDLongs on the weekly time frame shows how the number of shorts has been steadily declining in a falling wedge and is now on the verge of a breakout. Historically, we have seen such falling wedges break to the upside where the number of longs rises after escaping the falling wedge. All the technical indicators at this stage support such a breakout.Â Some investors and analysts are still very bearish on cryptocurrencies as they try to look for triangles or rising wedges or worse head and shoulders on the 15 minutes and 1 hour charts and then form their long term view based on those. Sure, the price could absolutely fall or trade sideways short term. However, the long term trend is very clear for those who are willing set emotions aside and look at the big picture.