FX.co ★ Bullish rally or bearish trend: what trend to prevail in September in crypto market?

On July 23, the crypto market launched a local uptrend. Since then, most coins have recovered to their three-month highs. However, during the last two weeks, digital currencies have not been showing any rise. Some of them have been falling, whereas others have entered an accumulation phase. However, the recent analysis of the on-chain indicators of the main assets unveiled the end of the accumulation phase.

We have conducted an analysis of Ethereum, Bitcoin, and XRP. As a result, we have noticed a rising divergence between the real price of coins and their on-chain activity. Experts at Glassnode are sure that such a situation points to the upcoming short squeeze that is likely to be followed by a rally. A falling social activity and indicators of Daily Active Addresses prove that the accumulation phase is coming to an end and the market will soon begin moving. A downward dynamic of indicators met other important facts, which also point that the uptrend will begin soon. Bitcoin hashrate continues recovering after a lot of miners have moved from China. In August, difficulties in the mining of coins advanced by more than 15%. Hashrate of the main altcoin reached a local high, thus reflecting mounting demand for the asset. As expected, the main capacities of the key cryptocurrencies will reach a consistently high level by the beginning of September. This, in turn, will contribute to the completion of the accumulation cycle.

Apart from that, traders should pay attention to the number of active addresses in the Bitcoin chain. It is stable at a rather low level, whereas divergence between Active Addresses and the real price of the coin is nearly 30%. ETH, XRP, and BNB are showing almost the same dynamic. When a difference between a price and on-chain activity reaches 25-30%, it means that the formation of a local accumulation range is coming to an end ahead of a sharp rally. The same dynamic was logged in the number and volume of transactions. If the rising volume of transactions in BTC and ETH could be caused by extremely high activity of holders and institutional traders, the growing number of operations points to the accumulation process.

Although the forecast is quite positive, experts at Glassnode suppose that such a large-scale divergence between on-chain activity and a real price may have a negative effect on the bullish rally. It is quite possible that the difference will narrow along with an increase of the main currencies and the whole market. That is why, retail traders are expected to be more active as they are likely to open short- and long-term positions. What is more, on-chain activity may start growing following the uptrend. It is quite possible that social and on-chain activity of the main cryptocurrencies is low ahead of a bullish rally. This could be caused by a larger number of institutional traders. Long-term holders were active amid the local upward movement on July 23.

However, if the on-chain activity fails to increase, a rise in the main cryptocurrencies is likely to be a short-lived phenomenon. Weak on-chain activity may prevent cryptocurrencies from benefiting from strong support levels and breaking resistance levels. If divergence widens, quotes may slide to local lows. In September, traders' reaction and local dynamic of on-chain indicators will determine the market movement. In summer, the crypto market managed to return to local highs and entered an accumulation phase that is expected to be followed by a bullish rally.