Back on October 24th 2023, I laid out my technical analysis for Bitcoin and told the bulls that a major breakout had triggered. The breakout zone was the $31,000 zone and I expected upwards momentum while the price of Bitcoin remained above this price level. In that article, my next resistance zone came in at $38,000.
Here is a reminder of the chart from that article:
Here is the current weekly chart of Bitcoin:
The breakout above $31,000 proved to be a trigger break. Bitcoin did test our resistance around the $38,000 zone for a couple of weeks before confirming a breakout above. As long as Bitcoin remains above $38,000, the uptrend can continue.
Now all eyes are on the psychological resistance level of $50,000.
However, I would add that there seems to be resistance near $47,500. This is why we do not like to use one price level as resistance of support. Instead, support and resistance levels should be called ‘zones’. Breaking out above this $47,500-$50,000 zone would be huge for Bitcoin. It would set us up to test previous all time record highs… and likely, print new all time record highs.
If we go down to the daily chart, you can see the battle around our previous resistance zone and the subsequent breakout. There is a possibility that Bitcoin could pullback to retest the $38,000 support zone but this would be a correction in an uptrend. If Bitcoin closed below the current higher low at $37,000, then would I worry about a hindering in the current uptrend momentum.
So why a bullish move? The fundamental news many analysts are attributing this Bitcoin and overall cryptocurrency move is optimism around the approval of spot Bitcoin ETFs, Binance’s settlement with the US government, and easing inflation.
It is worth noting that the potential approval of a spot Bitcoin ETF could turn out to be a “buy the rumor, and buy the fact event.” Or some argue, a “buy the rumor, sell the fact” move in early 2024.
The Securities and Exchange Commission is expected to rule on a spot bitcoin ETF proposed by Ark Invest and 21Shares by Jan. 10 2024.
This could be the catalyst taking Bitcoin to $50,000 by year end.
Both Bitcoin and Gold are rising together. For the Gold bulls, they attribute the breakout into record highs to the Fed expected to cut interest rates sometime next year. In fact, the entire stock market seems to think that as well. Stock markets are rising due to poor economic data suggesting a slowing economy and the Fed cutting interest rates rather than raising. Fed Fund Futures have had a massive shift in probabilities which lead to a roaring rip in stock markets. Something I have discussed in previous Market Moment articles.
I personally have seen Bitcoin act more as a risk on asset. Meaning it rips when stock markets rip. And with the current market narrative, there is a good chance Bitcoin will climb higher.
I mean take a look at those Bond yields:
We have had major breakdowns and continuation in bond yields suggesting the markets are pricing in the end of this rate hike cycle and are pricing in rate cuts. Lower yields are stock market positive and thus Bitcoin and Gold positive.
The US Dollar has shifted trends too and is currently testing the recent lower high. Sellers are stepping in here as expected, and the downtrend should continue as long as price does not close above the 104.20 zone.
Again, this hints at rate cuts rather than hikes. A weaker Dollar is positive Bitcoin (and Gold).
In summary, Bitcoin looks bullish from a technical analysis perspective and we should expect a test of the $47,500-$50,000 zone by year end. If the main market narrative is easing inflation and a dovish Federal Reserve cutting rates, then we should expect Bitcoin to rise with stock markets.
The only thing which could provide a hiccup to global bond markets would be the Bank of Japan. Traders are betting on a hawkish shift from the BoJ... which is a bit odd given that a few months ago the BoJ said they would not move because the rest of the Western world is done hiking and will be cutting. But a new chairman means new things. Keep an eye on the BoJ. They could be that Black Swan that no one is expecting.
Before I end, let’s take a look at Ethereum.
We had a major weekly candle breakout confirmed last week and this week is seeing bullish momentum follow through. The next target is the $3000 zone as long as Ethereum holds above the $2120 zone.
Let’s scope things out on the daily chart:
With the current price action, a new higher low is developing. But you can clearly see the major support zone around the $2120 area. A close below $2000 is what would hinder bullish momentum.
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