Is There Fuel for a Bitcoin Rally in 2023?

The start of 2023 has seen Bitcoin rise with confidence. Tired of the gruelling bear market, market participants are likely wondering whether what is happening signals a fundamental shift in the trend.

Armed with technical analysis tools, on‑chain indicators and expert opinions, ForkLog has examined the current situation.

What do the indicators say?

Technical analysis tools

Since the start of the year the price of the leading cryptocurrency has risen by about 40% — from around $16,500 to about $23,100 (as of 24.01.2023). However, digital gold is still far from the all-time high (ATH) near $69,000 reached on 10 November 2021.

Nevertheless, positive shifts in market conditions and readings from numerous indicators are encouraging.

«Although there remains a risk of a pullback and retest of the lows, it is quite plausible that we are entering the early stages of a new bull market», — поделился мнением Look Into Bitcoin founder Philip Swift.

On the weekly chart below you can see that at the start of the year a key support level B held. Rebounding from it, the price, like a knife through butter, pierced zone A. The latter had served as a bedrock for the volatile market for quite some time until the FTX collapse.

Swift does not rule out the possibility of a renewed downtrend. However, in his words, the path of least resistance lies upward. The next important target is near the $25,000 level.

For the first time since late December 2021, Bitcoin traded above the 200-day simple moving average — a kind of boundary between bear and bull markets.

Notably, the January rebound was supported by a substantial rise in trading volumes.

On‑chain indicators

In early November 2022, the price of the leading cryptocurrency breached the bottom of the previous cycle. Many thought that after overcoming the lower extreme a consolidation with recovery and a new bull trend was not far off. However, soon another “black swan” — the collapse of Sam Bankman-Fried’s vast business empire — occurred. In the wake of the FTX collapse, Bitcoin reached $15,476 (BTC/USDT on Binance).

Indicators CVDD and the balanced price in the second half of the year pointed to a high likelihood of the price reaching a cyclic bottom. After a while, consolidation with subsequent market recovery did indeed begin.

With each day after the price rebound from key metric values, the odds of continuing the rally increase, according to Philip Swift.

2022 was truly challenging for miners — rising hash rate and difficulty amid falling prices forced many players to sell digital reserves and/or exit the market.

Against this backdrop Puell multiplier has fallen into a zone of accumulation. The indicator is now leaving the “green zone,” historically signaling a shift from bear to bull.

The crossing of “hash ribbons” and the exit from the red zone of the Hash Ribbons metric indicates that the worst times for miners are behind, and also points to the potential for a continued rally of digital gold.

According to Swift, the above indicators signal investor confidence returning. A better market mood can reduce selling pressure, which is also positive for the price.

Bitcoin’s price has risen above the realized price for the first time in a long while. This is another positive signal for market participants, indicating a likely end to the bear phase.

On the heels of the FTX collapse and its fallout, Bitcoin’s realized capitalization at year-end fell 18.8% from ATH. This was the second-largest drawdown on record.

Such drawdowns are a rare opportunity for buyers, Bitcoin Magazine analysts argue. They contend that buying Bitcoin during such periods can yield substantial long-term profits.

The orange line of the MVRV Z-Score exits the “green zone” — another signal that the bottom has passed.

The orange line of the RHODL Ratio is preparing to leave the oversold zone. Its orange line is preparing to leave the oversold zone. The latter marks the most favourable period for Buy & Hold and/or DCA strategies.

First, long-run hodler activity in 2022 did not collapse; hours later tokens remained active and moved around. In 2022, more than 556 million BTC moved across the network worth almost $15 trillion. Compared with the previous year, that figure rose by 102%.

Market sentiment

The aSOPR indicator finally rose above 1.0, a level it had not left since the end of April last year. This signals improving market sentiment and also suggests there is enough demand to absorb selling from taking profits.

The cryptocurrency fear-and-greed index has finally moved to neutral values, though since April 2022 it has largely stayed in the “fear” zone.

Addresses and hodlers

An important fundamental factor is the growth in the number of Bitcoin addresses with non‑zero balances. It points to rising participation and accumulation of coins on wallets of those who believe in Bitcoin’s long‑term potential.  

For example, in 2022 the number of addresses with a balance of at least 1 BTC rose by 20%. The metric is growing exponentially, approaching 1 million.

Year‑over‑year, positive dynamics are also seen in smaller addresses, holding at least 0.01 BTC and 0.1 BTC.

The number of Bitcoin on hodlers’ wallets (including coins aged more than 155 days) is approaching 14 million BTC, about 72.5% of the total circulating supply.

«There are people around the world who are buying this asset. There is a huge and growing cohort accumulating Bitcoin, regardless of the price», said Dylan LeClair of Bitcoin Magazine.

HODL waves weighed by realized price point to a full market reset after the late-2021 peak (red and yellow bands). Such cooling has occurred at the bottom of previous bear cycles.

Macro factors

Limited supply and a host of other factors give grounds to suppose that global uptake could push Bitcoin’s price to astronomical heights.

Bitcoin’s market capitalization is less than $500 billion. The corresponding figure for gold is nearly $12 trillion, for fixed‑income instruments about $127 trillion, and for the housing market more than $250 trillion.

If Bitcoin’s share of global wealth were to reach just 1%, the price would exceed $300,000 and its market cap would approach $5.9 trillion.

Geopolitics and macro factors clearly influence capital markets and economic growth. Bitcoin’s price movement does not occur in a vacuum. The leading cryptocurrency rose amid a pandemic-era flood of liquidity. But when American authorities tightened monetary policy, the ascent quickly gave way to a decline.

According to Reuters’ economists, 61 of 90 respondents expect the Fed to peak at 4.75-5% in March, after which policymakers are likely to hold rates unchanged through year-end.

For a long time Bitcoin’s price moved almost in lockstep with the U.S. stock market, which in turn was sensitive to changes in the Fed’s rate.

However, at the start of 2023 Bitcoin’s correlation with the NASDAQ fell to 0.29—the lowest since December 2021.

It is not out of the question that, aided by decoupling from equities, the crypto community will soon revitalize the long-forgotten narrative of Bitcoin as a safe-haven asset.

What do the experts say?

Bloomberg strategist Mike McGlone is convinced that Bitcoin is forming a bottom in much the same way as before the start of the 2019 bull phase. The notable difference is the tightening of monetary policy globally.

Four years ago there was widespread easing of interest rates by monetary authorities. Today, they are still raising them, the expert said.

«Back then the Fed had already begun easing, and we held the bottom and broke higher. […] Right now they are aggressively tightening [policy]. Give it some time for Bitcoin. Overall yes, a bullish picture», — explained McGlone.

Senior Arcane Research analyst Vetle Lund also looks optimistically at Bitcoin’s prospects.

«A falling correlation is a positive factor for the market», — he emphasized.

Considering the on‑chain indicator readings, Swift forecasts the uptrend.

«It is quite possible that this is the best time to accumulate Bitcoin ahead of a new bullish rally», — the expert shared.

Conclusions

This review covers Bitcoin alone as digital gold. Yet it is clear to many that Bitcoin’s rise could act as a powerful driver for the broader market, as most coins remain closely linked to the first cryptocurrency.

The unstoppable growth of the hash rate despite falling prices likewise underscores miners’ ongoing investments in equipment and their confidence in future prospects.

The steadfastness of hodlers, who accumulate assets regardless of price movements, is impressive. The rise in coins across various categories of smaller addresses is also encouraging.

Many on‑chain indicators are already signaling the end of the bear phase. This suggests consolidation and a bullish rally are not far off. Strap in.

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