Is BTC Ready for a Breakout After Finding Support at $60,000?

Is BTC Ready for a Breakout After Finding Support at $60,000?

The short-term pullback found support at $59.5,000 and successfully maintained $60,000 on a daily closing basis. The significant rally with increased open interest, high funding rates and leverage ratios were all signals of caution.

Open interest has consolidated around $14.3 billion and funding has also cooled to neutral levels. The leverage ratio continues to rise and reached a recent high of 0.19, which is close to the peak in November 2020.

Chart according to TradingView

Technical indicators of BTC price

It is very good to see that the $60K level was held with a higher push. In the short term, Bitcoin price is making higher highs on the hourly chart, but we need to see BTC making a higher low while holding $60,000.

An early bullish divergence has formed over the past few days. It is now important to reclaim the previous all-time high at $64.8K to confirm that the short-term pullback is complete.

On-chain metrics

The current leverage ratio and overall market structure are similar to November 2020. The leverage ratio achieved at 0.18 has led to local highs, such as in September and April 2021. There is increased risk if the ratio remains near 0.18 and 0.20.

Chart from CryptoQuant

In November 2020, the leverage ratio peaked at 0.20, causing the BTC price to decline by 16% before reaching a new all-time high. The current diagram looks similar. BTC managed to easily surpass the previous all-time high, but increased open interest, high funding rates and leverage ratio led to an 11% pullback.

Chart according to TradingView

Given that the overall trend remains firmly bullish in fundamental and on-chain indicators, we should expect a bullish continuation once the pullback is complete. BTC is very likely to bottom between $60,000 and $53,000 – the September highs.

It is also possible that BTC forms a cup-and-handle formation where the price retests previous all-time highs, pulls back, and then pushes towards a new high.

Furthermore, miners continue to accumulate with reserves of 1.85 million BTC. The Medium Coin Age hit another all-time high, showing that long-term holders are not cashing out aggressively. Some older coin cohorts are selling easily, but there is currently no sign of a distribution trend. This is bullish considering that the price of Bitcoin recently rose above its all-time high and subsequently fell by 11%. Normally, in a bull trap, we would have seen long-term holders and miners allocating more aggressively while injecting FOMO into the market.

Chart from CryptoQuant

The data suggests that LTHs and miners continue to expect the price of BTC to rise and are refusing to sell in large quantities. It is important to note that they have historically paid out during bull markets. The trend usually starts when the price rises quickly. Therefore, it is important to watch it whenever it happens.

The supply is becoming increasingly thin, which makes it more difficult, especially for large institutions, to accumulate Bitcoin locally. Derivatives exchanges have seen large outflows recently, but most of these are likely internal to new cold wallets. Regardless, BTC remains in significant supply depletion as LTHs and miners continue to HODL.

Macro overview of BTC price

The overall macro environment continues to favor risk assets, including Bitcoin. The dollar is trending lower after hitting 94.47 earlier this month.

Stocks continue to post all-time highs, confirming that risk-on trading is resuming. The low interest rate environment, central bank balance sheets reaching new highs and the dollar's loss of purchasing power continue to make risky assets desirable, even though stocks may be fundamentally overvalued.

The overall trend in fundamentals, technicals and on-chain metrics remains bullish for Bitcoin price. Things look well positioned for the fourth quarter and increased volatility to the upside is expected.

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