FX.co ★ Learn and analyze: what on-chain metrics and bitcoin technical analysis mean during consolidation phase

The previous week bitcoin was in limbo and was on the verge of breaking down a significant support zone at $40,000. However, eventually the price managed to bounce off to the safe positions and bitcoin started the consolidation process. Notably, fluctuations in the narrow range of $43,000-$45,000 are accompanied by significant changes in on-chain indicators and horizontal charts of the cryptocurrency. Therefore, during periods of price consolidation, it is crucial to monitor changes in key BTC metrics to determine a further price movement.

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Technical indicators are instrumental metrics that allow you to perform a technical analysis of financial instruments over a certain timeframe. An important tool in determining the current market trend and an individual asset, as well as allowing you to determine the direction, strength and important areas of cryptocurrencies (financial instruments).

On-chain activity - actions of cryptocurrency market players, who independently dispose of their crypto-assets, due to which the record goes directly to the main blockchain. This statistic includes both private investors and large companies.

Price consolidation is a period of time when a certain cryptocurrency is within a narrow horizontal price channel. This process usually indicates price stabilization or weakness of market participants (buyers and sellers).

According to the hourly chart, bitcoin is within the narrow horizontal range of $42,700-$44,200 and has been moving along it since the rebound from $40,000. With the coin's technical indicators pointing to a sideways movement it is also a sign of price stabilization or weak market players. The RSI and stochastic are moving around the 50 level, signaling a timid attempt to move up towards 60. On the one hand, it is a signal for growth. However, on the other hand, it indicates weak buyers, who are unable to provide the necessary momentum.

On the 4-hour chart, the situation is similar. The cryptocurrency price is moving in a horizontal channel and the bulls and bears are engaged in a tug-of-war, which only stabilizes the price due to the weakness of both. Moreover, the main cryptocurrency technical indicators continue to recover after the price has spiked to $44,000. The MACD indicator is moving in the red zone, but it will soon cross the zero mark, while the stochastic is close to forming a bullish cross. At the same time, RSI is moving along the 55 mark, which suggests price stabilization and sluggish investor activity.

The daily chart shows a bullish candlestick that bitcoin formed at yesterday's close. This is a bullish signal and may indicate a further upside movement and bitcoin may try to consolidate above $44,500. On the daily chart, the price consolidation trend is best seen: all three major cryptocurrency indicators are in a sideways movement. At the same time, no prerequisites for successful development of bullish signals on stochastics are visible, which also indicates a weak market.

However, to have a more definite picture of a further price movement and investor sentiment, we should turn to bitcoin's on-chain metrics. First of all, it is important to note an upward trend on Daily Active Addresses charts during the last week. However, activity has fallen significantly over the past few days, while the price has been rising. This means that a divergence between the number of unique addresses and the market value of bitcoin has formed. In order to judge the possible consequences of this divergence, it is necessary to continue to monitor its development. If the dynamics are not confirmed, it may be a sign of a local whale activity.

Much more attention should be turned to the MVRV on-chain metric, which displays the current investment position of market players. During the last week the indicator considerably decreased from 15% to 6%. It confirms the fact that many market players moved or sold BTC coins at a loss. At 11:30 am, the onchain metric had crossed the support line at 6.57%, but stopped declining. If the indicator continues its downward movement, overcoming the 3% boundary will be an important signal for the market about a possible change of trend and the beginning of a bearish cycle. However, putting aside pessimistic forecasts, we note that the indicator's current level suggests that part of market players sold their available coins. Taking it into account, it is likely that bitcoin's price consolidation period may continue until market players satisfy all demand. In order to track these dynamics, you should monitor the on-chain metrics of stablecoin supply and the volume of coins available from 10,000 BTC.

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Daily Active Addresses - an onchain indicator that displays a number of unique addresses used by the bitcoin network during a certain period of time.

MVRV (Market Value to Realized Value) indicator - the indicator shows the ratio of market value to realized value of a particular cryptocurrency. This metric provides a more objective view of a coin's current value and market period. The metric also displays the results of moving coins: if the value is below 0, then players moved coins at a loss, and if it is above 0, then investors made a profit from transactions with coins.