Bitcoin Primed To Consolidate Before Price Movement

Key Takeaways

  • Bitcoin’s aSOPR indicator has reset, providing a bullish signal.
  • However, the cryptocurrency also faces stiff resistance ahead that may keep rising prices at bay.
  • Only a 4-hour candlestick close outside of the $31,000-$33,500 range will determine where Bitcoin is headed next.

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Bitcoin remains dormant after experiencing a high volatility period. While some on-chain metrics have begun to turn bullish, the technicals point to more consolidation ahead.

Bitcoin Presents Ambiguous Outlook

With Bitcoin’s impressive bull run to a new all-time high of $42,000 on Jan. 8, the Adjusted Spent Output Profit Ratio (aSOPR) indicator rose to a value of 1.28. The behavior seen in this on-chain metric suggested that BTC’s uptrend had reached exhaustion.

What came next was a 31.60% pullback that pushed Bitcoin’s market value below $29,000.

According to Glassnode, Bitcoin’s downward price action helped the aSOPR reset for the first time since mid-December 2020, indicating that the recent corrective period has come to an end.

“Bitcoin’s aSOPR has reset… [meaning] that coins moving between investors per hour (24h MA) are, on average, no longer being sold at a profit,” Glassnode suggests. “In order for SOPR to go lower, investors would have to be willing to sell at a loss, which is unlikely given the current shape of the market.”

Bitcoin aSOPR by Glassnode

Nonetheless, Bitcoin continues to consolidate within a descending triangle on the 4-hour chart.

From a technical perspective, the recent reset of the aSOPR index may help Bitcoin rebound from the triangle’s x-axis to the hypotenuse at $33,500. But due to the significant resistance ahead, rejection may occur, pushing BTC back to the $31,000 support level.

BTC/USD on TradingView

The thesis about further consolidation holds when looking at IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model.

Based on transaction history, roughly 1.40 million addresses had previously…

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