Bitcoin [BTC] has been trading in a range of $60,000 to $70,000 for more than half a year, experiencing occasional sharp declines below $60,000.
Despite the prolonged period of sideways movement, the Bitcoin Rainbow Chart has given a clear ‘buy’ signal for the digital asset amidst the Federal Reserve’s shift in policy.
This chart serves as an analytical tool that utilizes a range of rainbow colors and historical data to determine whether the cryptocurrency is either overvalued or undervalued.
The current price movement falls within the second color band, suggesting a significant buying opportunity.
Potential for BTC Growth?
The relatively discounted price of BTC was further supported by the MVRV Z score, a prominent indicator of market cycle tops. Historically, Bitcoin has peaked when this metric reached a range of 7 to 10.
With the current reading near 1, there appears to be ample room for Bitcoin’s price to surge. This indicates that the current BTC prices could be considered an exceptional deal.
Market sentiment also reflects this optimistic outlook, particularly in the Futures market. According to Edwards Charles, the founder of Capriole Investments, a crypto venture capital firm, the markets were exhibiting a consistently bullish trend for BTC perpetual contracts.
In this context, a bullish perpetual (highlighted in green) signifies an increasing market leverage and the opening of perpetual contracts. This trend suggests that more speculators are taking on additional risks by opening leveraged perpetual contracts, anticipating future price increases which historically mark the bottom points of BTC.
Yet, employing market leverage carries substantial risks of liquidation, potentially causing significant downward volatility.
In light of this, Bitcoin analyst Willy Woo expressed a “cautiously optimistic” stance as the asset has not definitively shifted to a bullish state. He remarked,
“Current demand and supply dynamics are neutral to bearish, but there are indications of a move towards a bullish trend with potential liquidations. Cautiously optimistic.”
On a separate note, QCP Capital, a crypto trading firm, maintained a positive long-term outlook for Bitcoin amidst the Federal Reserve policy adjustments. They commented,
“The initiation of a rate-reduction cycle targeted at normalizing interest rates favors tangible assets as reliable stores of value. While corrections and increased volatility are anticipated, it is essential to stay focused on the trajectory towards higher BTC valuations.”