As the price of Bitcoin (BTC) has hovered around $ 50,000 for several weeks, crypto analysts are trying to determine where the market is in this cycle. In recent days, several colorful BTC charts have been posted on Twitter, with interesting indicators superimposed on the price of the largest cryptocurrency on the market.
BeInCrypto looked at several indicators featuring colorful Bitcoin charts, which would likely shed more light on the current state of the cryptocurrency market.
We find in particular the Fear and Greed index [de peur et d’avidité], the financing rate of perpetual futures contracts and the evolution of the position of holders of long-term BTC. As it turns out, these indices all give moderate readings and generally indicate neutral sentiment in the market, which is awaiting the next big move in Bitcoin’s price.
The fear and greed index remains in “fear” territory
Bitcoin’s Fear and Greed Index has been below 50 (blue line) since November 22. Moreover, it has even been below 30 (red line) for most of the current period, indicating strong fear and apprehension of further declines in the price of BTC.
Bitcoin’s recent price breakthrough above its descending resistance line and its rally to the $ 50,000 area on December 23 pushed the index up close to 40. However, its drop of more than 6% from the 28 December brought fear back to the market, with the index posting a value of 27 on Wednesday, December 28.
The crypto analyst @dilutionproof tweeted a BTC chart dating back to 2018, in which the colors correspond to readings from the Fear and Greed Index. The resulting color chart shows at what points in the Bitcoin price action the sentiment of market participants was either maximally greedy, neutral, or conversely experiencing maximum fear.
It turns out that the fear and greed index works quite well as an indicator of local peaks (maximum greed, in red) as well as local lows (maximum fear, in blue). By comparing the current readings with the historical readings of Bitcoin, we see that the market today is in a rather neutral position, and which leans slightly towards fear.
This means that the probability of an upward movement is higher. However, due to the lack of extreme values, there is always a possibility that a decline will continue and reach a maximum fear level.
The funding rate is slightly positive
Another interesting indicator of the health of the market is the funding rate for perpetual futures contracts. When it is positive, holders of long positions periodically pay a small amount to holders of short positions. Conversely, when the rate is negative, short positions periodically pay an amount to long positions.
In other words, a positive funding rate for futures contracts signals that most market participants expect the price to rise. Thus, they are prepared to pay to maintain their long position. With a negative rate, most market participants, on the contrary, expect price declines to continue.
Over the past month, the finance rate has been slightly positive, mostly staying in the 0.004-0.009% range. This is a very modest positive value, and above all indicates a completely neutral sentiment in the BTC market.
We can also see that in the last few days the finance rate was close to 0. In contrast, on December 3 and 4 it fell to negative values with a low at -0.009%. Interestingly, Bitcoin’s price decline continued after December 4, but the funding rate did not return to negative values.
The on-chain analyst @DylanLeClair_ tweeted another color chart of Bitcoin, and where price is colored based on the value of the funding rate. The long-term perspective, which he calls a “fantastic view”, shows that a negative finance rate has very often been the determining factor for a trough in the price of BTC (red).
At the same time, very high positive readings, reaching around 0.1%, signaled local highs in BTC. Today’s finance rate values are neutral, despite the price continuing to correct. Again, this can be interpreted as a moderate bullish signal, although it still leaves some room for further decline.
Bitcoin’s long-term hodlers remain on the lookout
Finally, Bitcoin’s latest color chart uses an on-chain indicator that analyzes the behavior of long-term hodlers (LTH). Analysis of historical data shows that periods of LTH accumulation have coincided with declines and consolidations in the price of BTC. In contrast, strong price increases combined with strong distribution and sales of LTH to short-term market players.
The crypto analyst @samjrule tweeted another color chart of Bitcoin, in which he used the LTH behavior indicator. Specifically, the latter superimposed the 30-day change in LTH’s supply over the price of BTC over the past two years.
When the color of the graph changed to dark red, LTHs experienced a strong distribution. On the contrary, when it turned dark blue, LTHs were going through a wave of strong accumulation.
Today we see that despite the decline in Bitcoin price, LTHs are not accumulating BTC aggressively. In addition, they also do not sell their holdings. Their net position change indicator is in slightly negative territory (light orange).
This means that long-term hodler sentiment is proving cautious. They slightly reduce their exposure to BTC and do not buy more coins. However, their behavior is far from being an aggressive sale, so the overall sentiment remains neutral. Long-term hodlers patiently await the next big move in Bitcoin’s price.
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