Is the bear market back or is the bull market preparing?

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Bitcoin and Ethereum have finally recovered, after the oversold conditions, and reinforced by an encouraging attitude towards risky markets after the Fed meeting at the end of July. Markets for bitcoin and other digital assets reacted strongly to the U.S. Federal Reserve’s 75bp rate hike last week. BTC is down 5.7% this week and ETH is down 7.6%. Markets have generally reacted positively to the Fed’s announcement, with President Powell noting that the current federal funds target rate, ranging from 2.25% to 2.5%, is now considered neutral.

In many ways, this recent positive price action on Bitcoin and Ethereum suggests welcome relief, after nine months of constant bearish trend. Now the question is whether this is it temporary recovery or the start of an uptrend supports. Let’s uncover the clues that Glassnode’s analysis led to the events of last week.

On-chain analysis of Bitcoin activity

Speaking in general, sustained burst of the network transaction signal influx of new requests into the blockchain network. Both network activity and supply dynamics can be used as benchmarks to measure performance against recent comparative periods.

Active Bitcoin addresses remain firmly in a well-defined downtrend zone. Additionally, the ATH for October-November is significantly lower than in April 2021, indicating a market shake and lagging demand. Aside from some bursts of activity during major chapters, current activity suggests there will be even more. small influx of new demand at the moment.

Due to the low demand for transactions Network transaction fees are firmly in bear market territory. Bull markets usually support high fees. This is often one of the first signs of an upturn in demand. While a noticeable increase in fees is yet to come, it is recommended that you keep an eye on this indicator, which could signal a recovery.

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Brief explosion of activity on Ethereum

The Ethereum network over the past 12 months has generally seen the same trends as Bitcoin. As a result, there has been a gradual deterioration in overall network utilization and congestion. Demand for Ethereum transactions has gradually declined since liquidation in May 2021. brief activity of the last few weeksn. If this trend continues to rise, this could be constructive and should be observed.

Ethereum typically has more transactions in the mempool (a temporary buffer that temporarily stores user transactions) than Bitcoin. The block room is regularly filled to over 99% of its capacity. Because of this, Observing the gas tariffs paid is often an appropriate method of monitoring actual congestion.. This metric ultimately represents the urgency of users waiting for transaction confirmation versus how much they are willing to spend on commissions.

What Ethereum gas prices have been falling lately. It is in fact the lowest network congestion and gas price since May 2020, before the DeFi summer and before the start of the bull market. This signals that, despite the recent positive price action, no influx of new applications and overall, Ethereum has a relatively low level of activity.

SOPR indicator

in Outgoing Profit Ratio (SOPR) it is a chain indicator. It is calculated by dividing the realized value (in USD) by the cost of creating the consumable product (also in USD). Easier fits The relationship between the selling price and the price paid. If the ratio is greater than 1, the owner of the sold good makes a profit.

For Bitcoin, SOPR is looking to surpass 1.0 for the second time since the beginning of June. It usually takes a few tries for the market to reach the speed of movement. BUT The ideal bullish scenario would be a crossover above 1.0 followed by a retest.find support.

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Ethereum, by the way, was luckier above SOPR 1.0and finds his first new test as support. However, given the somewhat lackluster network activity readings, it is prudent to watch out for a move below 1.0, which could indicate weakness. This would be similar to previous bearish periods with a brief deviation above 1.0 before returning to net loss territory.

What should be considered?

Both Bitcoin and Ethereum experienced extreme oversold conditions last week. Feeling of risk appetite after the Federal Open Market Committee meeting (FOMC) July 26-27.

However, at first glance, the demand for on-chain transactions remains weak at best. Therefore, this recovery has not yet been followed by a convincing increase in demand activity.. Bitcoin blocks are partially empty and Ethereum gas prices have been at their lowest for several years.

Of course, blockchain business is only part of the picture as well The first signs of a return to profitability of the SOPRs are encouraging.. The focus can now be shifted to maintaining and improving these bullish trends to determine if it is simply a weakening of the bear market or a more constructive structural change.

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