What is Bitcoin’s bottom of the cycle according to capitalization models?

Bitcoin has been trading sideways for the past few weeks. It is still consolidating between the $36,000 and $45,000 levels, liquidating bulls and bears on multiple occasions.

With the current economic and geopolitical uncertainty, it would be wise to consider the worst case possible and plan for it.

Technical analysis

In: edris

The daily chart:

On March 7, BTC rebounded from the lower bound of the range and broke above the 50-day moving average. The following day, it regained momentum to retest and close below the 50 DMA average.

Today, Bitcoin has tested this dynamic resistance again, but has so far failed to break it up so far. However, if the price succeeds, the next significant resistance line would be 100 DMA, which was only tested once in early December last year.

Above the 100-day moving average is the upper limit of the range, the $45,000 zone. It has rejected the price four times since early 2022. On the other hand, if BTC fails to break above the 50-day moving average, all eyes will be on the $36K support zone to see if it can push the price higher. . again.

Source: TradingView

The 4 hour chart:

Within the 4 hour time frame, it is evident that BTC is still consolidating into the bearish flag pattern, failing to reach one of the trendlines for the third time. This structure confirms the continuation of the bearish scenario, in which only a bullish breakout of the upper trendline would be disproved. Furthermore, the RSI demonstrates a balance of power between the bears and the bulls at the moment as it is at the 50% mark, trying to break once again.

Source: TradingView

Onchain Analysis

In: edris

Bitcoin capitalization models

With the current economic and geopolitical uncertainty around the world, it would be wise to consider the worst case possible and plan for it. The chart below consists of different Bitcoin capitalization models such as the Market Cap (black) and its 200-day moving average (yellow), Realized Cap (green) and Delta Cap (blue).

Source: CryptoQuant

Historically, the DMA 200 has been a reliable support in bullish markets and strong resistance during bear markets. Therefore, the above areas are generally considered bull territory. The Realized Cap was also a reliable support in the first phase of the bear market. However, it tends to be broken down for the final capitulation, and when the market returns above it, a bull (or mini-bull) market begins.

Finally, Delta Cap marked the absolute bottom of the last two bear markets with high precision. Considering these facts and the graph shown, it is evident that the area between Delta Cap and Realized Cap has been the best shopping zone in the last eight years. Currently, that price range would be $17,000 to $24,000.

It also appears that the amount of time spent and the percentage of drawdown below the Accomplished Threshold has been decreasing with each cycle. This steady reduction can be explained by the increasing adoption of Bitcoin, particularly by institutional investors. More and more people are seeing value in Bitcoin over time and are eager to allocate a portion of their portfolios to “Digital Gold” when it seems cheap. These capitalization models would be useful in determining whether Bitcoin is undervalued or in a bubble.

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