Today we are investigating whether this current price rally is a bear market relief rally, or a truly sustainable shift in market structure. Now, it could very well be both. All bear markets end with a disbelief rally off the bottom. The question is whether in the near term we should be considering this as THE rally, or instead being more cautious about its longevity.
One of my favourite tools to complete this assessment is onchain activity. This is the analysis of the user-base. Do we have more people coming online? Is interest in Bitcoin and Ethereum growing? or is it declining suggesting a deterioration of fundamentals?
One of the best checks to do is compare the onchain data with the behaviour of the masses. Right now, they look near identical, punching to relative lows for the cycle, and giving us very little to write home about.
Of course, lets not worry TOO much about google trends. Besides, the masses arriving is a sign we are near the top not the bottom.
But when we have strong confluence between onchain signals, and metrics like this, it sets up a fair degree of confidence that we are lacking an influx of demand, and thus left with the HODLers only.
With all this in the bag, I consider the higher probability that we roll over. HOWEVER, we may well have a few more weeks to even months ahead of us before this happens. After a 9-month long downtrend, all risk-on assets are due a good upswing. Just long enough to convince the bulls its back on, and high enough to blow up all the shorts…before the scary retest lower.
Iron stomach required ahead.