The price of Bitcoin surged higher on May 26, breaching the $40,000 level for the first time in five days as traders brushed aside concerns about China’s crypto ban and the United States’ crypto tax proposal.
The benchmark cryptocurrency reached an intraday high of $40,855 before turning lower owing to profit-taking sentiment.
In the meantime, analysts such as Cheds and Korous AK expect BTC/USD to hit $42,000 in the short term but advised caution on extended upside positions unless the spot market confirms a clear bullish breakout.
Cheds, particularly, showed a bullish conviction if Bitcoin reclaims its 200-day simple moving average (200-day SMA), which is currently around $40,600. The wave has historically served as a strong price floor against long-term bearish trends.
Be careful getting too bullish until $BTC #Bitcoin turns both the 42k area and MA 200 back into support on daily
— Cheds (@BigCheds) May 26, 2021
Bitcoin briefly closed above 200-day SMA. Source: TradingView
More support for a bullish Bitcoin outlook came from on-chain data. At least three blockchain-focused metrics showed that the cryptocurrency bottomed out after crashing to $30,000 on May 19.
Bitcoin exchange deposits decline
On-chain analytics platform Glassnode revealed earlier on May 26 that the total number of crypto addresses sending Bitcoin to cryptocurrency exchanges declined on a seven-day average timeframe.
Previous 1-month low of 6,356.643 was observed on May 25. Source: Glassnode Alerts
The metric, dubbed “Number of Addresses Depositing to Exchanges,” illustrates the number of unique addresses that appear as a sender in a transaction sending funds to exchanges. Simply put, it shows a decline in the number of new Bitcoin traders who might want to transfer BTC to exchanges to sell it or trade it for other assets.
New traders/investors are prone to react more emotionally to wild crypto price swings. But with the Glassnode metric showing a plunge in unique Bitcoin depositors to exchanges, it signals a downtrend in potential selling pressure.
NVT reaches classic bullish reversal level
Meanwhile, the seven-day average output on Bitcoin’s network value-to-transaction (NVT) signal has dropped to a 14-month low, Glassnode data shows.
Bitcoin bearish sentiment seems to be exhausting as the NVT signal drops to March 2020 low. Source: Glassnode Alerts
Bitcoin’s price reacted bullishly when the NVT signal touched 500 on the hourly chart, as the chart above shows. Based on fractal sentiment alone, the metric now suggests a sharp bullish reversal in the Bitcoin market as it trades 36% above its previous bottom level of $30,000.
Accumulation address uptrend
Another Glassnode metric shows that the latest Bitcoin price dip has done very little in shaking investors’ long-term bullish sentiment. The “Number of Accumulation Addresses” claimed a record high just as the BTC/USD exchange rate hit $30,000 on May 19, taking the total to above 545,000.
#Bitcoin HODL Army is growing through this dip. pic.twitter.com/L8q6vO0rZl
— Bitcoin Archive (@BTC_Archive) May 26, 2021
Glassnode defines accumulation addresses as those that have at least two incoming Bitcoin transactions and that have never spent funds. The analytics service considers these addresses as long-term holders.
A spike in accumulation addresses during the BTC price crash that destroyed billions in leveraged positions shows that bulls with long-term setup absorbed the selling pressure. That marks another sign of bearish exhaustion as Bitcoin attempts to flip $40,000 into a new support level.