Bitcoin is forming a consolidation structure on the daily and 4-hour timeframes. Based on the number of active users on the network — the lack of demand among retail investors is still evident. Therefore, any sudden change in market sentiment can lead to unexpected volatility.
Bitcoin bounced off the multi-month downtrend line after failing to sustain its bullish rise. It also broke the 50-day moving average with significant negative momentum.
The cryptocurrency is now trading above the $35K support zone. From a technical point of view and due to the uncertainty in macro conditions, the market may be in a variation/consolidation phase in the medium term. The $34K to $35K demand zone will be at the bottom of the mentioned range, while the $45K to $46K supply zone will be at the top.
The price has broken the blue trendline, has risen to the top of the range, and is retesting the trendline in the form of a pullback on the lower timeframes. There are two possibilities here:
BTC completes the pullback and moves towards the top of the range. To do this, it must first generate a higher bullish price action pattern and then consolidate before starting the rally as seen in the green pattern. Both the trendline and support zone fail to keep the price above them, and bitcoin starts a new bearish rally to reach lower price levels. A major long liquidation event is inevitable in this scenario, fueling the negative trend.
Bitcoin Active Addresses (EMA 30):
Supply dynamics are the main focus of on-chain analysts. However, it is evident that there is another side to the price discovery equation — demand. In the past year, particularly after the ATH of $64K in March 2021, most long-term holders have stuck to their strong HODL conviction and even accumulated more.
As a result, the price hit a second ATH in November 2021 ($69K), but has dropped by more than 50% since then. Looking at the number of active addresses (30-day EMA), it is evident that there were far fewer active users on the network at $69K compared to $64K.
This bearish divergence demonstrated a massive lack of demand. Rumors of the Fed’s phasing out and rate hikes played their part in preventing many retail investors from returning to the market. This metric will be a crucial indicator to look out for in the future. Also, if the price of bitcoin is about to hit a bottom and start a new rally, it should coincide with a spike in inactive addresses. If it doesn’t, it’s likely a bull trap.
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