Although BTC prices fell below $70,000 during Wednesday morning's Asian trading session, the market is not yet overbought, according to analyst James Cech.
“Right now, using various volume indicators as inputs, BTC price appears to be correctly aligned with fundamentals,” he said in his May 21 newsletter.
Moreover, the market appears to be similar to the second half of 2020, he added.
In early December 2020, BTC price rallied, reclaiming its 2017 all-time high of $20,000. It continued to consolidate around this level for several weeks, surging to a new all-time high of $30,000 by New Year's Day.
Does history rhyme?
In this most recent cycle, BTC price has risen to nearly recapture its mid-March high of $73,738 but has found resistance there, signaling it may be entering a zone of positive momentum and price discovery.
“There have only been seven days in history when the closing price was higher than this.” [$71,000]So we're really breathing thin air here,” the analyst said.
He further said that “convincing all-time highs are rarely successful the first time,” and that a period of “cutting wood” and a few significant attempts afterwards are common. .
Additionally, the network value-to-transaction (NVT) ratio suggests that Bitcoin price is in line with on-chain transaction throughput, similar to the situation seen in late 2020.
Additionally, the short-term holders' expensed production return (SOPR) indicates that the market is “enthusiastic” but not in a “euphoric” stage, indicating the possibility of a sustainable upward trend. I am.
This is a condition where a significant number of holders are caught off guard and end up over-purchasing coins at too high a price.
Glassnode analysts also refer to a “top-heavy” market situation, where a significant number of investors are holding assets at a loss. But he points out that the situation has improved significantly, with only 6.6% of the short-term holder supply now incurring losses, reducing the risk of panic selling. .
More chop consolidation coming soon
On May 21, fellow analyst Recto Capital predicted that a weekly candlestick close above $71,500 would “probably initiate a breakout from the reaccumulation range.” However, BTC price had already fallen to $69,782 at the time of writing.
He added that as history suggests, BTC should consolidate within this reaccumulation range for several more weeks.
