Bitcoin Price Rises Above the 120-Day Moving Average Again: Rebound or Reversal?

Since Bitcoin found support at the $30,000 psychological level on July 20, 2021 (Hong Kong time), it has staged a decent upward rally over the following two weeks. According to quotes from the OKX platform, Bitcoin price is currently hovering around $43,000 at the time of writing, having closed above the 120-day moving average for two consecutive days.

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Recent Bitcoin price trend, Source: OKX

From a technical analysis perspective, the 120-day moving average is generally regarded as the dividing line between bull and bear markets in the crypto market. Historical data shows that the first time Bitcoin price touched the 120-day moving average in the past year occurred on September 4, 20209. After 6 days of consolidation finding support near the 120-day moving average, it kicked off a 7-month bullish rally, surging from around $10,000 to $64,800. The second time Bitcoin price touched the 120-day moving average occurred on May 13, 2021 15. After multiple failed attempts to break through the $60,000 level in early May, the market quickly turned downward, eventually confirming a break below the 120-day moving average on May 16, and trading below this average for nearly 3 months thereafter.

The third touch of the 120-day moving average is the current one starting from August 6. Given the special significance of the 120-day moving average in technical analysis, we take this opportunity to not only monitor the direction of this average, but also explore what other data worth attention lies behind Bitcoin price fluctuations, helping us more comprehensively grasp market dynamics and more deeply perceive market sentiment while conducting technical analysis.

Overview of Crypto Market

In this section, we will focus on observing changes in total crypto market capitalization, Bitcoin's market cap dominance, and Bitcoin inflows/outflows from CEX addresses.

First, let's look at the recent trend in total crypto market capitalization. According to statistics from CoinGecko, as of 12:00 on August 9, the total crypto market capitalization has broken through $1.8 trillion, having recovered 70.58% of its losses from the year's peak. By comparison, Bitcoin's current price is approximately 66.3% of its April high. It's not hard to see that beyond Bitcoin, the current crypto market has already seen more diverse investment targets that are uniquely attractive to investors.

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Total crypto market capitalization trend since 2020, Source: CoinGecko

This change is also reflected in Bitcoin's market cap dominance. According to data from Bybt, Bitcoin's current market cap dominance is approximately 45.77%, up about 20.04% from its May low of 38.13%, far lower than Bitcoin's price increase over the same period. However, looking at the absolute dominance of 45.77%, Bitcoin still remains in an unshakable dominant position in the crypto market, and such a structure clearly has positive significance for the healthy development of the future market.

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Bitcoin market cap dominance, Source: Bybt

Next, let's look at Bitcoin inflows and outflows from CEX addresses. According to Glassnode statistics, since June 16, the daily Bitcoin flow from CEX addresses has basically shown a net outflow status. During the period from July 28 to August 8, daily net outflows of Bitcoin from CEXs remained above 60,000 BTC, with the single-day net outflow on July 30 reaching 108,000 BTC.

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Bitcoin inflows and outflows from CEX addresses, Source: Glassnode

From another perspective, this change can be seen more intuitively through the balance of Bitcoin in CEX addresses. According to Glassnode data, from June 1 to now, the balance of Bitcoin in CEX addresses has dropped from a high of 2.6108 million BTC to 2.494 million BTC on August 8.

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Changes in Bitcoin balance in CEX addresses, Source: Glassnode

Digging Deeper for More Insights

In the process of studying Bitcoin trends and even crypto market movements, many details often have greater mining value, such as on-chain trading information, changes in institutional investor holdings, etc. Behind these are very concrete key indicators that can directly reflect investor sentiment.

Take recent Bitcoin on-chain trading information as an example. Let's look at the changes in Bitcoin daily on-chain trading volume since February 2021 as compiled by OK Link. From the chart below, we can see that Bitcoin on-chain trading volume has increased significantly in the past two weeks. Whether looking at the lowest daily trading volume or the highest daily trading volume, there has been a substantial increase compared to July. Specifically, daily trading volumes on August 1-2 reached $1.17 trillion and $1.42 trillion respectively, far exceeding July's highest trading volume of $547.4 billion, approaching this year's highest trading volume level. This change has a close temporal relationship with Bitcoin price breaking above the 120-day moving average.

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Bitcoin daily on-chain trading volume changes since February 2021, Source: OK Link

Combining the recent on-chain trading volume trend, let's look at changes in on-chain transaction counts over the same period. From the chart below, we can find that although Bitcoin on-chain transaction counts have increased slightly in the past two weeks compared to July, the increase is significantly smaller than the change in trading volume over the same period. Based on this, we can preliminarily speculate that the recent Bitcoin price rise was likely driven mainly by relatively large-value trades.

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Bitcoin daily on-chain transaction count changes since February 2021, Source: OK Link

Therefore, we can further verify this by combining changes in the number of addresses holding between 1 and 100 BTC. Regarding the reference range for Bitcoin holdings selected here, it should be further explained that since the number of addresses holding more than 100 BTC is relatively small and shows little change, while addresses holding less than 1 BTC likely have trading amounts that mostly don't align with our conclusion above, we have selected the above range. This range is further subdivided into two intervals: holdings of 1-10 BTC and holdings of 10-100 BTC. From the chart below, we can see that both the number of addresses holding 1-10 BTC and the number of addresses holding 10-100 BTC have shown significant growth recently.

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Changes in the number of addresses holding 1-100 BTC, Source: Glassnode

Next, let's look at changes in institutional investor holdings. After Tesla released its second-quarter earnings report at the end of last month, we conducted a tracking analysis "Can Bitcoin Hold Above $40,000? Tesla Releases New Earnings Report, Did Musk Lose Money?" . In the previous article, we learned from Tesla's published balance sheet that as of June 30, Tesla's net Bitcoin holdings were $1.311 billion, with an impairment of $23 million related to Bitcoin assets. According to regulations from the Financial Accounting Standards Board, we inferred that Tesla did not sell any crypto assets in the second quarter. The release of this news, to some extent, gave investors in the crypto market continued confidence in the future market. However, since financial reports of listed companies like Tesla have a certain lag, we can also obtain more timely information by monitoring professional institutional investors in the crypto market, such as the well-known Grayscale Trust.

Statistics from OK Link show that Grayscale's GBTC currently still holds 650,000 BTC. However, it should be noted that since February this year, Grayscale has not made any purchases for 6 months, and GBTC's premium rate in the secondary market has maintained a negative premium level for nearly 5 months, with the maximum negative premium once expanding to -21.23%. This means that purchasing GBTC in the secondary market offers greater return potential than directly subscribing. On the other hand, we also noticed that in the past half month, GBTC's negative premium level has significantly improved compared to the previous two months, narrowing to -7.53% as of August 8. This may indicate that investor pessimism about the future market has eased.

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GBTC secondary market premium rate changes, Source: OK Link

Additionally, according to fund holdings data from Ark Investment Management, ARK funds purchased 1,055,375 shares of GBTC on June 22. Due to institutional investors' advantages in fund scale and access to information, tracking mainstream institutional investor movements is also an important part of obtaining crypto market information.

Conclusion

"History doesn't repeat itself, but it often rhymes." In most investment markets, including the crypto market, experienced investors are well aware of the power of this proverb. Whether it's technical analysis or fundamental summary, for investors in the unpredictable crypto market, always maintaining reverence for the market must be put first.

Returning to the topic of this article, when Bitcoin price has experienced nearly 3 months of downtrend and arrives at the 120-day moving average again, will a reversal definitely occur? Perhaps at this point, what's important is no longer pursuing a definite answer, but rather within one's own trading system, effectively implementing risk control, respecting the market, and following the trend to seek advantages and avoid harm - this is the key to ensuring sustained returns.

Disclaimer

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