Puell’s analysis indicates a predominantly positive cryptocurrency outlook, albeit with mixed signals. 
Puell expresses a pessimistic view of the future prospects for Binance’s BNB token, which is currently grappling with growing regulatory scrutiny. 

David Puell, an on-chain analyst affiliated with Ark Invest, has released an extensive and well-researched report that presents his insightful views on the present situation and future potential of Bitcoin. This comprehensive report, named “The Bitcoin Monthly: July 2023,” delves into various essential subjects crucial for comprehending the current state of Bitcoin. Puell’s nuanced perspective adds depth to the understanding of Bitcoin’s current standing and what lies ahead for the cryptocurrency.

The subjects covered encompass a thorough market overview, examining Bitcoin’s subdued volatility and its potential implications for a significant decline or surge, along with a conversation about the influence of the Federal Reserve’s tightening policy as a key signal of price deflation.

Ark Invest’s Near-Term Bitcoin Price Prediction

Low Volatility

According to Ark Invest’s near-term Bitcoin price forecast, Puell’s analysis indicates a predominantly positive outlook for the cryptocurrency, albeit with some mixed signals. The prediction suggests that Bitcoin could reach $29,230 by the end of July, surpassing its 200-week moving average and its short-term-holder (STH) cost basis of $28,328. Puell interprets this as a robust support level for Bitcoin, hinting at the possibility of an upward trend in its value.

Nonetheless, the 90-day volatility of Bitcoin, reaching 36% in July, a figure last observed in January 2017, indicates a neutral perspective. Puell clarifies that due to this decreased level of volatility, Bitcoin’s price can experience a substantial movement in either direction within the upcoming months. However, the exact direction, whether upward or downward, remains uncertain.

Miner Dynamics

Puell also highlights bullish indicators, one of which is the evidence of miner capitulation. He explains that in July, the 30-day moving average of Bitcoin’s hash rate fell below its 60-day moving average, indicating a situation where miner activity had capitulated. Such miner capitulation is commonly linked with oversold conditions in the BTC price, implying the possibility of a bullish turnaround.

The “liveliness” metric, which gauges potential selling pressure compared to current holding patterns, also indicates a positive trend. According to the analyst, liveliness declined to less than 60% in July, showcasing the most robust long-term holding behavior since the last quarter of 2020. This implies that a larger number of holders are retaining their coins instead of selling them, potentially increasing the price.

Short-Term Holding Ratio

The short-term-holder profit/loss ratio, specific to ARK, concluded in July at approximately 1, which is regarded as a positive indication. Puell elucidates that this breakeven level aligns with previous local bottoms during primary bull markets and local tops during bear market conditions.

Pessimistic Outlook for Binance’s BNB Token

Nonetheless, Puell expresses a pessimistic view of the future prospects for Binance’s BNB token, which is currently grappling with growing regulatory scrutiny. He cautions that due to the mounting regulatory pressure on the crypto exchange, Binance’s native token, BNB, may be heading towards substantial instability. The potential breakdown of BNB could have wider repercussions on the overall stability of the cryptocurrency market, including BTC.

Macro Outlook

Regarding the broader economic perspective, Puell examines the potential consequences of the Federal Reserve’s significant 22-fold increase in interest rates. He sees this development as a negative factor for Bitcoin and the overall economy. He states,

“According to renowned economist Milton Friedman, monetary policy works with long and variable lags’ that last 12-18 months, suggesting that the full impact of the Fed’s 22-fold increase in interest rates has yet to hit.”

The Zillow Rent Index, which serves as a leading indicator for Owners’ Equivalent Rent (OER) by approximately nine months, suggests that Consumer Price Index (CPI) inflation might significantly slow down to below 2% by the end of the year. Puell considers this a positive signal for Bitcoin since it could enhance the appeal of non-inflationary assets like Bitcoin.

Regarding falling US import prices from China, Ark Invest adopts a neutral stance despite the yuan’s depreciation of around 12% since February 2022. Puell notes,

“All else equal, China exporters should have increased prices to offset the depreciation of the yuan. Instead, they have cut prices, harming their profitability.”

In summary, Puell’s report presents a multifaceted view of Bitcoin. While numerous indicators are pointing towards a potential bullish trend, some considerable risks and uncertainties could lead to bearish outcomes.

 

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Filed under: Bitcoin - @ August 7, 2023 7:11 am