- Bitcoin price bounces off from $56,000 daily support level, eyeing for a rally ahead.
- US Spot ETFs record mild outflows of $43.90 million on Wednesday.
- Technical indicators and on-chain data point to a rally ahead.
Bitcoin (BTC) price trades slightly higher around $58,000 on Thursday after finding support around the $56,000 level on Wednesday, supported by an improved market mood for risk assets. This recovery happens despite US Bitcoin Spot Exchange Traded Funds (ETF) recorded mild outflows on Wednesday. On-chain data projects a rise in Bitcoin’s price as its exchange reserves are decreasing and the long-to-short ratio trades above one.
Daily digest market movers: US CPI data spurs risk-on tone
Bitcoin price strengthened after the United States (US) released the August Consumer Price Index (CPI). The US Bureau of Labor Statistics reported that the annual CPI rose 2.5% YoY, easing from the previous 2.9%. Also, the core annual figure matched the July one and expectations by printing at 3.2%. However, the monthly core increase was higher than anticipated, hitting 0.3%.
The data suggested that the US Federal Reserve (Fed) will opt to cut interest rates by 25 basis points after its meeting next week, the first cut since 2019. The news propelled US stock markets, and cryptocurrency markets followed suit.
US Bitcoin Spot Exchange Traded Funds (ETF) data recorded an outflow of $43.90 million on Wednesday, the first outflows so far this week. Still, this outflow is small compared to the total Bitcoin reserves held by the 11 US spot Bitcoin ETFs, which total $49.34 billion in Assets Under Management (AUM).
Bitcoin Spot EFT Net Inflow chart
Bitcoin ETF AUM chart
Turning to on-chain metrics, Coinglass’s BTC’s long-to-short ratio is at 1.07, the highest level in almost one month and flipping above one on Thursday. This means more traders are betting on the asset’s price to rise.
Bitcoin long-to-short ratio chart
CryptoQuant exchange reserve data is also positive for Bitcoin. The data provides insights into the level of accumulated selling pressure within an exchange. This metric stands at 2.5 million BTC, the lowest level since November 2018, and has constantly declined since mid-August. The decreasing reserve indicates that investors are more inclined to withdraw their crypto from the exchange for purposes other than immediate selling, thereby reducing the supply available for trading, bolstering a bullish outlook for Bitcoin price.
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Bitcoin Exchange Reserve chart
Technical analysis: BTC bounces off $56,000
Bitcoin price retested the daily support of $56,022 on Wednesday and bounced from it. At the time of writing, it continues to rise by 1.1% on Thursday at $57,965.
If the $56,022 daily support holds, BTC could continue to rise to restest $59,529, its 50% price retracement level (drawn from a high in late July to a low in early August).
This rise in Bitcoin’s price is additionally supported by the Moving Average Convergence Divergence (MACD) indicator on the daily chart. The MACD line (12-day Exponential Moving Average, blue line) rises above the signal line (26-day Exponential Moving Average, yellow line), giving a buy signal. It shows green histogram bars above the neutral line zero, also suggesting that the asset’s price could experience upward momentum.
BTC/USDT daily chart
However, the bullish thesis would be invalidated if Bitcoin closes below the $56,022 level. In this scenario, BTC could decline by another 3.5% to restest its psychologically important of $54,000.
Cryptocurrency metrics FAQs
The developer or creator of each cryptocurrency decides on the total number of tokens that can be minted or issued. Only a certain number of these assets can be minted by mining, staking or other mechanisms. This is defined by the algorithm of the underlying blockchain technology. Since its inception, a total of 19,445,656 BTCs have been mined, which is the circulating supply of Bitcoin. On the other hand, circulating supply can also be decreased via actions such as burning tokens, or mistakenly sending assets to addresses of other incompatible blockchains.
Market capitalization is the result of multiplying the circulating supply of a certain asset by the asset’s current market value. For Bitcoin, the market capitalization at the beginning of August 2023 is above $570 billion, which is the result of the more than 19 million BTC in circulation multiplied by the Bitcoin price around $29,600.
Trading volume refers to the total number of tokens for a specific asset that has been transacted or exchanged between buyers and sellers within set trading hours, for example, 24 hours. It is used to gauge market sentiment, this metric combines all volumes on centralized exchanges and decentralized exchanges. Increasing trading volume often denotes the demand for a certain asset as more people are buying and selling the cryptocurrency.
Funding rates are a concept designed to encourage traders to take positions and ensure perpetual contract prices match spot markets. It defines a mechanism by exchanges to ensure that future prices and index prices periodic payments regularly converge. When the funding rate is positive, the price of the perpetual contract is higher than the mark price. This means traders who are bullish and have opened long positions pay traders who are in short positions. On the other hand, a negative funding rate means perpetual prices are below the mark price, and hence traders with short positions pay traders who have opened long positions.
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