INTRO: bitcoin springs to life after a week of more pain

The fallout from the deleveraging crash has continued to dampen crypto market sentiment, with several of the details surrounding the bankruptcies of Voyager, Celsius, as well as ongoing stablecoin failures continuing into September. However, after another week of negative price action, bitcoin staged a rapid reversal and recaptured the levels prior to the Jackson Hole sell-offs in late August. Now 10 months since bitcoin’s ATH, more larger buyers are taking advantage of the accumulation zone sub $19K in anticipation of the next bull run.

What's in the news?

Nord Stream closure adds to macro pressures

Macro conditions have continued to weigh down markets, with the deepening energy and inflation crises fanning the fears of a deepening global recession. On September 2, the Russian government announced it would not restart the Nord Stream 1 pipeline to Europe even after essential maintenance works were carried out. This was perceived to be a strategic play in retaliation for sanctions imposed by the US and the EU over the Ukraine invasion) and Russia has intimated that it will not turn back on the pipeline until the sanctions are ended.

Bitcoin breaks to the downside...followed by a sharp reversal

After trending steadily down over two weeks since the breakdown out of the ascending wedge, bitcoin broke the $19,500 support that had been tested multiple times going back to August 28. Bitcoin’s slide on September 6, also put the brakes on ethereum’s momentum – dropping some 7.7% intraday – after it had shown signs of overcoming the FUD around potential issues for its upcoming merge.

While bitcoin’s initial technical breakdown could not be pinned on a singular sell-side event, negative news served to maintain market pessimism, particularly as the space continues to grapple with the impacts of the summer’s deleveraging events. For example, Voyager Digital commenced the auctioning of its remaining assets as part of its continuing chapter bankruptcy that was originally filed in July, with liabilities estimated between $1-10 billion. Similarly, revelations surrounding Celsius’ gross mismanagement of customer deposits have fuelled rumours of them engaging in ponzi scheme activity, all of which have done nothing to help crypto market sentiment.

Bitcoin surges on Fed news

Despite the above, bitcoin staged a sharp rebound over a 24h period on Friday 6, after hawkish comments from Fed Chair Powell who underlined that they remain “strongly committed to this (tightening) project and will keep at it until the job is done.” Bitcoin traded as high as $21,424 intra-day and with the RSI sitting around 52, it indicates that this relief rally could have legs if upwards momentum is maintained as more traders and whales step in to go long at current levels.

What does the onchain data say?

Despite vintage coin dumping, more large buyers are entering

As reported in the last Weekly Digest, short-term holders’ control of the current total bitcoin is quite small, which is increasing the balance of downward pressure towards older coins. For example, on September 4, 5,000 BTC that had previously been dormant since December 2013 and originally purchased at $693, were moved to the Kraken crypto exchange.

At the same time, while dormant supply has played a greater role in sell-side pressure as STHs have left the market, whale inflow onchain analytics shows a large uptick in activity since bitcoin’s corrective slide under $20K. We can see in the chart below a cluster of whale purchases below $20K and this steady accumulation was a primary factor for the eventual breakout on September 6th.

The onchain volume profile (OVP) now shows robust support at 19,077 – a zone which also aligns with the TA support levels – and this is likely to remain the local floor in the weeks ahead. Is this trend reversal decisive enough to trigger the next bull run? It’s too early to tell and a retest of the lows levels cannot be ruled out should this relief rally falter at the $23K level or earlier.