Bitcoin sentiment running high on Bakkt volume and technicals
All things considered, it seems to be a good time for contrarians to expect the worst.
The plunge brought it below significant breakpoints, which appeared to set it up for further pain. But it's seen a hearty bounce back since then. It quickly recovered from that six-month low and has now spent a good few days in the much safer looking $7,500 range.
In doing so, it's largely invalidated some of the worst-case scenarios being thrown around earlier this week. It's also charted a very optimistic-looking head and shoulders pattern says Quantum Economics analyst Mati Greenspan, although Bitcoin doesn't seem to be in any huge rush to validate that pattern.
But at the same time, Bakkt trading has continued ratcheting up and decimating its old volume records over the last week, both when pessimism gripped the markets and during the subsequent rise.
Anecdotally, animals on social media are saying that they've noticed an optimistic shift.
Less anecdotally, traders on Bitfinex have also remained net long since the bounce back assuaged people's worst fears, although the lack of a continued rise may be raising concerns. Overall, however, it's thought that the eagerness with which traders snapped up Bitcoin at under $7,000 may indicate a hearty amount of support.
All in all, it seems to be a good time for contrarians to expect the worst.
Is the halving priced in yet?
Historically, impending Bitcoin halvings – when the Bitcoin issuance rate drops by 50% – have tended to be priced in from about six months beforehand, assuming those historical price changes were indeed related to each upcoming halving.
It's not clear whether there's any connection between current price movements and the upcoming halving, but it is clear that the markets will be watching it with great interest while bearing in mind that past performance is not an indicator of future results.
This is because past and current Bitcoin prices are a reasonably good match for the stock to flow theory of Bitcoin valuation. The only way this theory can hold after the next halving is with a fairly monumental price rise.
As such, significant price movements from now until then may give important clues about where Bitcoin will go in the future, or even whether it has a future.
Of course, that's contingent on those clues being correctly interpreted, Bitcoin price movements not just being coincidence, the assumption that Bitcoin's unresolved scaling problems won't inhibit its growth and the spectre of Bitcoin's self-evidently unsustainable economics not spooking potential buyers.
Either way, it's set to be quite a ride.
Disclosure: The author holds BNB and BTC at the time of writing.