An on-chain metric which has been declining since 2017 is now signaling a bullish trend, analysts from Stack Funds say.
A new report analyzing on-chain activity says that Bitcoin (BTC) is now due for a bullish phase based on supply movements.
Published by asset manager Stack Funds on July 2, the findings suggest that 90-day active supply is dictating bullish potential for BTC/USD.
BTC price to rise “sooner rather than later”
Publishing an accompanying chart for the metric, Stack argued that it has important implications for historical price behavior.
“The data provides an indication of two folds. Firstly, the 90d % of Bitcoin active supply has tapered over the past 3 years, from 36% to 17%, suggesting that investors’ time horizon has lengthened as Bitcoin are held over longer periods in their wallets,” the report states.
“Secondly, prior to the 2017 and 2019 bull run, where Bitcoin hit $20,000 and $14,000 highs against the dollar, there was evidence of steep surges in the 90d % active supply (depicted in the green zones).”
The trend has appeared since Bitcoin’s price crash in March, an event which proved to be something of a watershed moment for traders.
“As statistics have shown, a potential run-up in Bitcoin prices can be expected, which has yet to materialise, leading us to believe that the preceding rise in Bitcoin prices could happen sooner rather than later.”
Bitcoin 90-day active supply 3-year chart. Source: Stack Funds
BTC price should be “closer to $12,000”
Stack comes hot on the heels of a highly bullish report from Bloomberg, which last month eyed price-performance exceeding $12,000.
Current ranging price behavior around $9,000 is “compression” for Bloomberg, and a reaction should come in the form of gains in the short term.
“Volatility should continue declining as Bitcoin extends its transition to the crypto equivalent of gold from a highly speculative asset, yet we expect recent compression to be resolved via higher prices,” analysts summarized.
While many indicators are encouraging, it is the demand which is clearly bullish. This, the report continues, is also the “most important” category to win over for Bitcoin.
“Increasing addresses used, on-exchange investment product inflows and futures open interest create firmer underpinnings for the benchmark crypto,” it states.
“The number of active Bitcoin addresses used, a key signal of the 2018 price decline and 2019 recovery, suggests a value closer to $12,000, based on historical patterns.”
Bollinger bands foresee volatility
Beyond that level, the bullish potential by no means fades. In a technical prognosis, Bloomberg describes Bitcoin as a “caged bull” which can hit even higher levels.
“About $8,000-$10,000 is the primary consolidation range,” it explains.
“We see Bitcoin, at about $9,200 on June 25, as more likely to head toward the 2019 high close of just below $13,000 than sustaining under $8,000.”
A classic indicator, Bollinger Bands, points to a breakout “soon.” Historically accurate at charting volatility in either direction, the bands have shown characteristic narrowing in recent weeks — a key precursor to bigger price movements.
BTC/USD 6-month chart showing Bollinger Bands. Source: TradingView
Last month, their creator, John Bollinger, himself weighed in on BTC/USD, cautioning against optimism over a spurt above $10,000.