Bitcoin [BTC] can come at the end of something, but this also warrants caution

Bitcoin has seen some bullishness in the last 24 hours after a brief recovery back above $20,000. Investors who have been closely monitoring its performance over the past few weeks may have noticed its confinement to a narrow range. However, it could be closer to the far end of that range and things are about to get more interesting.

Bitcoin has been stuck between the $19,000 and $24,000 levels for more than a few weeks. It has broken out of this range only a few times since June, meaning the tight range has extended by at least three months.

Bitcoin’s historical price action has seen periods where the price traded within such a narrow range followed by the return of directional price action with high volatility. Now, if the same observation applies to the prevailing range, the cryptocurrency might just be at the tail end of it.

Additionally, an analysis of BTC’s long-term prospects suggests that it has interacted with its long-term support.

#BTC KISSING 12 YEAR SUPPORT! pic.twitter.com/r1ohknSgmC

— MMCrypto (@MMCrypto) September 17, 2022

Previous instances of price interacting with the same support band have featured long bearish wicks. A repetition of the same would thus result in a major pullback, thus leading to a bear trap before the next major uptrend.

The above observation is also reflected in Bitcoin’s long-term pricing model. The price of BTC was trading below the realized price zone at the time of writing this article. This is further evidence that the cryptocurrency is at the bottom of the ongoing bearish cycle.

Source: Glassnode

BTC’s MVRV ratio also appeared to indicate that it has regained strength. Well, this isn’t necessarily a guarantee that the price is now on a recovery path. In fact, some of Bitcoin’s metrics suggest that the bears are not done yet.

The number of addresses with more than 1,000 BTC has decreased significantly since the beginning of September.

Source: Glassnode

Addresses holding more than 1,000 BTCs have fallen to their lowest levels in 4 weeks so far.

Additionally, BTC’s new address metric showed that the number of new addresses has slowed. These observations suggest that there are outflows and slowing growth. This further reinforces the prevailing short-term bearish narrative for the world’s largest cryptocurrency.

Conclusion

Although the long-term metrics suggest BTC is at the bottom of its current range, the short-term metrics warrant caution. Inevitably, many traders get overexcited and this can lead to an increase in leveraged long positions. Such an outcome would also be ripe for an unexpected major sell-off that would lead to prolonged liquidations and trigger further downside.

The above scenario would pave the way for a long bearish wick configuration ahead of the next major rally. A possible option, but not a guarantee. Such a case would also present an opportunity to buy at a higher discount.

Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers