Bitcoin Order Books Hint at Market Bottom, Bullish Shift Ahead

September 14, 2024

Teuta Franjkovic

Senior Journalist

Expertise : Cryptocurrency, DeFi, Web3, DAO, Blockchain, FinTech

Teuta is a seasoned writer and editor with over 15 years of expertise in macroeconomics, technology, and the crypto and blockchain sectors. She began her career in 2005 as a lifestyle writer for *Cosmopolitan* before transitioning to business and economic reporting for renowned outlets like *Forbes* and *Bloomberg*. Inspired by thought leaders like Don and Alex Tapscott and Laura Shin, Teuta embraced blockchain's potential, viewing cryptocurrency as one of humanity's most transformative innovations. Since 2014, she has specialized in fintech, focusing on crypto, blockchain, NFTs, and Web3. Known for her strong collaboration and communication skills, Teuta also holds dual MAs in Political Science and Law.

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Bitcoin Price Prediction: Are ETF Inflows Fuelling BTC Rally?

Highlights

Bitcoin's order books hint at a potential price bottom and upcoming bullish trend.
Low market depth, indicating decreased liquidity, often coincides with market bottoms, suggesting a possible reversal.
Bitcoin Hints at Resurgence Despite Bearish Sentiment

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Bitcoin’s supply and demand dynamics, as indicated by its order books, suggest a potential price floor and an approaching bullish trend.

Recent analysis by Black Capital highlights a notable decrease in market depth over the weekend, impacting both near-term and long-term buy and sell orders. This reduction in market depth, often associated with market reversals, may signal an end to Bitcoin’s price decline that began in late August when it exceeded $65,000.

Low Bitcoin Market Depth Suggests Possible Price Reversal

Market depth, a measure of liquidity, gauges the market’s ability to absorb large trades without affecting prices.

This metric is influenced by various factors including time of day, market conditions, and specific price levels. Typically, market bottoms are characterized by diminished trading activity, leading to fewer buy and sell orders and reduced liquidity. Analyzing the combined spot order books, particularly at the 0%-1% and 1%-5% depth levels, shows that low liquidity often correlates with market bottoms. This reduced order book depth can act as an early indicator of a potential Bitcoin price reversal, often preceding the onset of a bullish trend.

Traders should monitor these signals to anticipate significant market movements. Identifying these imbalances can be crucial in spotting key turning points in Bitcoin’s market.

The 1% market depth captures the total volume of buy and sell orders within 1% of the current mid-market price, while the 5% depth reflects liquidity 5% away from the mid-price. Hyblock tracks Bitcoin market depth across various exchanges, including Binance and Coinbase.

Macro Trends Favor BTC as Price Rebounds

At the time of writing, BTC price was trading at $59,868, reflecting a 4.3% increase from Friday’s low of $52,530. Despite this rise, funding rates in the perpetual futures market for Bitcoin remain negative, indicating a preference for bearish positions, or shorts, as reported by Coinglass.

If the market maintains its strength, bears might capitulate, covering their shorts and potentially driving prices higher. The LondonCryptoClub newsletter highlighted that with current negative funding rates and light positioning, a short-term increase in prices could be likely.

The newsletter also noted that positive macroeconomic trends are emerging for Bitcoin, suggesting that economies driven by fiat and debt cannot sustain high real rates for long. The opportunity to normalize rates and reduce central bank balance sheets has now closed. While short-term caution is advised as the market seeks assurance from the Federal Reserve, the newsletter suggests that Bitcoin and the broader crypto market are poised for a resurgence.