Bitcoin (BTC) price has been swinging wildly during the first week of the 2024 ghost month with a huge 20% drop and a 13 % bounce back. The beginning of the ghost month, which takes place from August 4 to September 2, is considered to be an unfavorable period in the Asian culture, and has always affected the market psychology, particularly in the cryptocurrency market.
However, BTC price recovery was evident with the price swaying between an intra-day high and low of $57,726.88 and $54,486.22, At press time, BTC was exchanging hands at $57,211, a 3.70% surge from the support level.
Historical Patterns and Market Psychology
Bitcoin underwent different degrees of correction during each subsequent moon month from 2017 to date. This is based on Chinese lunar calendar phenomenon which implies cautionary approaches due to investor fear especially among Asians.
On the other hand; even though cultural beliefs do not impact directly on market fundamentals but psychological effect often leads to increased market caution and lower profit expectations.
Data shows that Bitcoin has repeatedly undergone significant drawdowns over this period accompanied by flash crashes as being common phenomena. The last occasion it did not occurred was in 2021 when ghost months came as a bullish moment before entering into multiple bears thereabouts till today; this year is appearing to follow suit given its initial decrease in prices by half or so.
Market Metrics and Investor Behavior
Therefore, when analyzing Bitcoin’s current fundamentals; one should also consider its Market Value to Realized Value (MVRV-Z) score which acts as an important variable for studying present market dynamics. By comparing market value versus realized value; MVRV-Z index provides insights into whether it may be over or under-valued.
It crossed that threshold during previous bull cycles such as historic Bitcoin highs i.e., above than 3 but currently sits at only around 1.40 as of this year’s end of February meaning that BTC remains undervalued.
Additionally data from coinalyze indicates that Bitcoins open interest (OI) has dropped significantly from $21 billion to under $15 billion, which suggests a cautious approach from traders in order to avoid liquidation. This fear was further confirmed by the sale of maximum number of coins at loss that commenced with a ghost month when 5.2 billion BTC worth were shifted in just an hour for coins aged below seven days.
Institutional Investment and Technical Analysis
In this regard, institutional investors still have a major role in the market dynamics of Bitcoin and there is on-chain data that shows they did not exit during the latest price drop. According to Santiment, big holders also known as whales accumulated more than thirty thousand Bitcoins in the recent bearish market.
This goes along with Metaplanet’s announcement of an investment worth $69.13 million into Bitcoin following MicroStrategy’s model.
Bitcoin Technical analysis suggests that Bitcoin may be setting up for another quick bull run before resuming its larger downtrend. After breaking down an upward sloping trendline; bitcoin tested support at $49,917 and saw slight relief bounce off point. It represents a critical resistance area as per 61.8% Fibonacci retracement level ($62,066) due to two additional reasons; firstly it coincides with the broken trendline secondly it aligns with 100-day Exponential Moving Average EMA value.
Therefore, if Bitcoin fails to clear above this hurdle; then it will possibly plunge by almost twenty percent back towards its initial support price line located at around forty nine thousand nine hundred seventeen dollars per coin while its Relative Strength Index (RSI) stands near thirty five suggesting some relief rallies ahead yet lower lows are coming next leading us towards fifty mark.
However, if prices settle above $65, 600 once again or even close near those highs seen at end of July (on August 2), then there is possibility we might be entering new market structure phase with higher chances favorable momentum taking place quite soon enough.
