The turbulent market conditions that Bitcoin has been experiencing over the past several days and weeks has muddied the clarity that many analysts and investors previously had with regards to the strength of the firm 2020 uptrend BTC was previously caught within.
Although the cryptocurrency has been able to post a decent bounce from its recent lows, it still remains unclear as to whether or not the damage done by its recent downtrend is enough to invalidate the bullish market structure formed by its recent rally.
Much to the chagrin of bears, however, Bitcoin’s on-chain economic data seems to paint a bullish picture, with multiple different factors suggesting that it is still undervalued and that a price rebound is imminent.
Bitcoin’s Technical and Fundamental Strength Suggests a Rebound is Imminent
The past few days have been rough for Bitcoin, with the cryptocurrency plummeting to lows of $8,400 before finding some support that has allowed it to climb up to $8,850 today.
Today’s climb also comes as the recent decline in on-chain activity grinds to a halt, which may have a loose correlation with the cryptocurrency’s price action.
Glassnode, a prominent blockchain analytics firm, spoke about this in a recent blog post, explaining that last week’s decrease in active entities has slowed signficiantly, which could mean the selloff is over and a rebound is imminent.
“Although the price has continued to drop, last week’s decrease in active entities has slowed to a halt, signaling a potential recovery in on-chain economic activity and providing hope for a rally in the coming weeks.”
Glassnode further goes on to note that this rebound could be bolstered by technical analysis, as the cryptocurrency has been able to maintain above its 200-day moving average – a key support level.
This Indicator Shows BTC is Significantly Undervalued
Further adding to this bullish narrative is Bitcoin’s MVRV Z-Score, which is an indicator that Glassnode uses to asses Bitcoin’s “fair value” that can subsequently be used to determine whether or not it is over or under-valued.
“The present low MVRV Z-Score suggests that BTC is still undervalued, with significantly more room to grow before reaching the next market top. This provides support for many analysts’ prediction that bitcoin will stay above $8000 for the time being,” they explained.
Image Courtesy of Glassnode
The confluence of these multiple factors certainly works in the favor of buyers, with both technical and fundamental analysis suggesting further upside is imminent.
In order for this narrative to be validated, however, it is imperative that bulls propel Bitcoin past the resistance it is currently facing around $9,000.
Featured image from Shutterstock.