Last Friday, Bitcoin witnessed a notable fluctuation around the $26K consolidation as the U.S. Federal Reserve Chair Jerome Powell’s speech on interest rate hikes and US inflation shook the crypto market. Jerome Powell conceded that another interest rate hike by the Federal Reserve could be on the horizon. Following this news, Bitcoin’s price dipped below $26,000 but soon rebounded. Traders are now preparing for big moves amid a ‘calm before the storm’ moment in Bitcoin’s price next week.
Bitcoin Becomes Undervalued As Network Activity Increases
Lately, Bitcoin has been pretty stable, disappointing day traders looking for more action, which has led to a dull market mood. Additionally, traders are hesitant to open new futures contracts, especially since open interest has fallen by $4 billion in the past two weeks.
Interestingly, an on-chain indicator suggests that Bitcoin is currently undervalued, making it a good opportunity to go long on BTC for the coming week. The NVM ratio recently jumped to 0.52, which is below the 0.6 level considered to indicate undervaluation. The “NVM ratio” is a metric that looks at the relationship between the logarithm of Bitcoin’s market value and the square of the number of its daily active users.
A high NVM Ratio suggests Bitcoin is overvalued, while a low one implies it’s undervalued. The metric’s current downward trend hints at room for a price increase, as network activity is positive.
However, September hasn’t been a great month for Bitcoin’s price historically. Looking at the weekly returns from week 36 to 39, Bitcoin usually starts September on a down note, with the exception of a positive event in 2022. The good news, however, is that Bitcoin typically rebounds by the end of the month, averaging a 7% return in the final week of September.
What’s Next For BTC Price?
Bitcoin price continues to face resistance on the upper trend line of the triangle pattern, signaling that bearish traders are still selling during upward moves. This has confined the BTC’s price within a range of $25,300 to $26,800. As of writing, BTC price trades at $26,041, surging over 0.02% in the last 24 hours.
Consolidation near the lower end of the triangle pattern will be a negative indicator, suggesting that bullish traders are not buying aggressively. Currently, bulls are trying to send the BTC price above the EMA20 moving average to strengthen their long positions. However, the RSI level hovers below the midline, giving an advantage to bears in defending an immediate surge.
If the price falls below the $25,300 mark, it could activate stop-loss orders for multiple traders, potentially leading to a wave of long position liquidations. This could send the BTC price tumbling towards the crucial $24,700 support level.
On the flip side, a closing price above the 20-day EMA would be an initial sign of bullish momentum, potentially paving the way for a rally toward the crucial $26,800 level. Further buying pressure might break the consolidation and send the price to $28K.
