October would be a decisive month for the price of bitcoin

In his most recent analysis of the bitcoin (BTC) market, analyst Willy Woo stated that, with the recent rally in its price, this cryptocurrency had already left the discount levels it previously showed. With the build-up to highs, the analyst says, bitcoin price action could enter a strong rally in the coming months, which would continue for much of 2022. 

Woo notes that heavy purchases of BTC by long-term holders have slowed, while a moderate level of profit-taking by speculators has been recorded . “The overall picture is neutral, and there is no more information coming from the on-chain data ,” the analysis notes. 

A heightened level of speculation is on the horizon on bitcoin derivatives exchanges as potential approval of a bitcoin ETF by the U.S. Securities and Exchange Commission (SEC) is awaited , Woo says. “The speculation around this event outweighs the effect of supply and demand, which is quite neutral at present.” In this sense, it could be a catalyst for the next direction of the bitcoin price.

Long-term bitcoin price outlook

Long-term holders have reached an accumulation peak, as shown in the following graph. “Based on past behavior, we will have possibly two or more months before the resulting supply shock manifests itself and propels the price into a multi-month rally,” the analyst notes most recent bulletin . 

The supply shock from long-term holders tracks coins that have been held in their wallets for more than five months, Woo notes. “Five months is the threshold at which the probability that the currencies move (that they are sold) begins to decline,” says the analyst. 

Medium-term forecast

The graph below tracks bitcoin investors who have a strong tendency to accumulate and hold. Woo sees this graph, which reflects BTC moving towards these market participants, as an indication of demand from those investors over the medium term . “We are currently in a neutral area, it is neither bullish nor bearish,” he asserts. 

Moderate bitcoin purchases from whales

Whales’ shopping habits can be used as another way to predict the medium term, Woo says. 

Whales tend to sell over a long period of time, but there are areas where they take the opportunity to buy. These periods tend to signal an upward trend in subsequent months.

Willy Woo, professional trader and market analyst.

In this graph, Woo shows an oscillating perspective on whale habit. In the long term, sales predominate, and the supply controlled by these market participants is declining. But there are moments of moderate rallies in supply that the whales control (purchases) and that has a bullish effect on the price, according to the graph. It is also noted that the sales of whales, which are detected by a steeper slope of the downward curve, translate into a downward trend .  

Investor activity in bitcoin, neutral in the short term

The graph below shows the investors’ daily trading heat map. The red dots represent sales and the blue dots purchases, while the sizes of the circles indicate the magnitude of the transactions. 

Neutral activity is currently evident, while the dotted circles show three areas of intensive sales. The study highlights that the current rally started after a divergence zone, in which sales intensified, but the price fell. 

Another point of view of the same situation is seen in the following graph, in which the net flow of bitcoin in the exchanges is represented. Most of the buying activity took place in September, however, it was only after the start of October that the reaction was seen, with a bullish rally . 

Meanwhile, in the following graph, from the bitcoin supply shock, it can be seen that while speculative investors have been taking profits (the low supply shock), cumulative investors have retained their BTC, that is, they have remained neutral.

A bitcoin ETF just around the corner

While this is not a quantitative on-chain analysis, Willy Woo highlights that there are several ETFs that will be the subject of SEC decisions as of October 18. “If any of these ETFs are approved, we can immediately expect a speculative rally,” says Woo. 

CriptoNoticias reviewed on October 7 a study by Arcane Research that shows the dates on which the SEC will announce its decisions on 19 requests for bitcoin ETFs that have been introduced this year. Twelve of them are “physical” ETFs or directly backed by bitcoin, while the remaining seven are based on bitcoin futures contracts. In the month of October, for example, decisions on four of these ETFs based on bitcoin futures will be known, introduced by ProShares, Invesco, VanEck and Valkyrie.