Bitcoin could continue its downtrend as there are few catalysts to reverse the cryptocurrency’s fortunes, says Galaxy Digital research lead Alex Thorn.
Thorn said in a note on Monday that there is a “significant chance” that over the coming weeks, Bitcoin (BTC) could fall to the bottom of a gap in supply at $70,000 before testing its realized price of $56,000, the average cost of all BTC in circulation.
“Catalysts remain hard to find and narratives are also working against Bitcoin as it fails to trade along with gold and silver as part of a market-wide ‘debasement hedge trade,’” he added.
Bitcoin climbed 3% on Monday to trade just under $78,500 after climbing from a 9-month low. It is currently down 39% from its all-time peak of over $126,000 in early October, per CoinGecko.
Bitcoin could find support at realized price, marking bottom
Thorn said Bitcoin has historically traded below its realized price at the bottom of previous bear markets, and has typically found support “around or slightly below” its realized price before trading higher.
He added that Bitcoin has also seen “key support” at its 200-week moving average, its average price over that time, in each of the last three bull markets when it has fallen below its 50-week moving average.
Thorn said Bitcoin lost support at its 50-week moving average in November, while its 200-week moving average currently sits at $58,000.
“Those levels have historically marked cycle bottoms and made strong entry points for long-term investors,” he added.
Long-term holders’ slowing sales could signal bottom is near
Thorn said that there is also “little evidence of significant accumulation” from large buyers and long-term holders. This could weigh on Bitcoin’s price as it signals buyers could be waiting for it to move lower before buying in.
However, Thorn said that long-term holder profit-taking, which can push down prices, has “begun to notably abate” but added its “possible there are more long-term holders who are waiting for higher prices to sell,” which can create resistance to price gains.
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“Nonetheless, the recent decline in long-term holder realized profit taking is notable and should signal we are closing in on a bottom,” he added.
Market structure bill unlikely to be major catalyst
The crypto industry is closely watching the US Senate, as lawmakers look to pass a crypto market structure bill set to outline how the sector will be regulated.
However, Thorn said that while the passage of the legislation “could act as a near-term exogenous catalyst, odds of passage have diminished in recent weeks.”
Lawmakers have struggled to garner bipartisan support for the bill and the momentum behind getting the legislation passed has faded as the Senate Banking Committee, key to passing the bill, has not rescheduled a meeting to advance the bill.
Regardless, Thorn said that “any positive momentum generated by passage [is] more likely to yield benefit to altcoins than BTC.”
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