Bitcoin Network Momentum Adds Confluence to Wyckoff Accumulation and Near-Term Bullish Reversal
Whenever trying to gauge direction in markets, it’s important to take in all data in order to form a directional bias.
It seems to me that many have forgotten about the Bitcoin Network Momentum Indicator. It hasn’t been making headlines, but it has done an excellent job in spotting tops and bottoms, and right now it suggests a bullish reversal.
What this indicator tracks is # of BTC moved on-chain/BTC Price in USD
Below is the the bitcoin price (in yellow) against the bitocoin network momentum indicator on the bottom.
When we see divergence between the price and the network momentum indicator, it is usually a sign of a change in trend. At the most recent top when price hovered around the $60,000 level, notice the drop in the value ofthe indicator as price kept rising. This is bearish divergence.
During the most recent correction, we’ve seen a very steep rise in the indicator while price declines, which is a bullish divergence and suggests accumulation because coins are changing hands.
This is unlike what happened as seen on the chart at the market cycle peak in 2017. Network Momentum continued to collapse along with price, which we’d expect to see today if this was a cycle top. Also note, the steep rise in early 2019 in Network Momentum that preceeded the steep run-up in price from 3k-14k.
The current divergence between price and the indicator suggests a bullish reversal soon.
Many have been discussing Wyckoff Accumulation during this correction, and even the man who owns the original Wyckoff Institute is thinking that this price action does indeed suggest accumulation. Pictured below is the BTC price charted against a cumulative volume index. This shows that selling pressure is coming in while price continues to hold this level, which is bullish.
Overall market sentiment is bearish in the crypto markets with some claiming that BTC is in the middle of a major bearish head and shoulders pattern that targets $10,000. Some are even predicting lower prices. This is typical near bottoms. Take a look at the Crypto Fear and Greed Index:
When people are scared due to negative news propogated in the media, it’s usually a sign of a mid-term cycle correction. Most of the 2017 cycle corrections were met with very bearish news in the media, except for the 2017 ATH where eveyrone was bullish. While it is not certain that counter trading sentiment is always a profitable trade, it’s another data point that strengthens the bullish case.
I do think we’re near the bottom on this correction and once price starts to reverse, so will the news and sentiment. Once everyone is bullish again due to more mass adoption announcements via countries and corporations, it’ll be time to start thinking about exits.