Bitcoin may need to spend some time in this range for the coming months, in part due to the market structure mentioned above, but also due to the fundamentals of where we are in Bitcoin’s market cycle. At this stage of the cycle, it is common to see some older coins moving on-chain as long-term holders, who can act as a proxy for ‘smart money,’ start to move their coins. The psychology around this is that they have weathered the storm of the bear market lows and now want to take some funds out of the market following the initial price recovery. When that happens, the Value Days Destroyed (VDD) indicator increases. Those increases are shown by the orange spikes on the chart, following a period of green which represents relatively fewer older coins moving on-chain during the bear market lows.
This indicates that some profit taking is happening with older coins as we move out of the bear market. In prior cycles, as this process unfolds over the course of a few months, Bitcoin price remains range-bound. Increased demand is met with this supply from market participants who have held during the bear market. It is possible we will need to see something similar play out again over the next few months.
Bitcoin’s current market structure suggests that it may need more time to broadly range before any potential aggressive moves towards previous all-time-highs are attempted. Though with strong support levels down towards $20,000, it is likely that pullbacks will be relatively limited and 2022 Q4’s lows will hold.
