peshkov
The stock market rally still demonstrates a lot of momentum, with the S&P 500 (SPY) showing a year-to-date return of 7.11%, Furthermore, the market’s focus on the tech sector, with AI-related companies like Nvidia (NVDA) experiencing substantial revenue growth and stock price increases, is not waning yet. Besides Nvidia, however, the star of 2024 is without a doubt Bitcoin (BTC-USD). Additionally, there are signals from the US central bank hinting at rate cuts, sparking hopes for even more sustainable gains in stocks and crypto.
Review
As expected, the launch of all those new Bitcoin spot ETFs like IBIT, FBTC, BITO, ARKB, BITB, HODL, BRRR, EZBC, ARKW, BITX, BITQ, WGMI, BTCW, BTF, STCE and BETH in early January initially led to a swift pullback of approximately -21.5%. However, and not as anticipated, the crypto bulls quickly regained control starting from January 23rd. Initially rather slow but accelerating from February 7th onward, demand from the new Bitcoin spot ETFs went through the roof and drove prices sharply upwards.
New all-time high at USD 73,794
Breaking through USD 50,000 ignited an impressive surge in prices. Bitcoin euphorically surged past all resistances, reaching a new all-time high of USD 73,794 on March 4th. This marks a staggering +91% increase from the low on January 23rd in just seven weeks! Since the low of USD 15,479 on November 22nd, 2022, Bitcoin has seen an even more sensational increase of +376.7% within just thirteen and a half months.
In hindsight, we had completely underestimated the demand from those new Bitcoin spot ETFs and mistakenly anticipated a more prolonged correction or consolidation period primarily below the all-time highs and the 61.8% retracement level at USD 48,500.
Instead, the new ETFs turned everything upside down, sparking a spectacular Bitcoin rally. Only since the new all-time high at USD 73,793 did we witness a significant pullback of -17.66% a week ago, reaching an initial low point at USD 60,760. While the rally has been slightly shaken, overarching sell-signals have not yet emerged. Rather, Bitcoin quickly recovered to around USD 68,250 and has recently been fluctuating around the USD 65,000 level.
Bitcoin Halving, as of March 9, 2024. (Pantera Capital)
Bitcoin – Potential correction despite ETFs and Halving
The next “halving,” expected to occur on April 15th, 2024, could potentially intensify buying pressure in the coming weeks. With mining reward automatically decreasing from 6.25 Bitcoin per block to only 3.125 Bitcoin per block, this reduction in supply is likely to have a medium-term impact on price discovery.
Major financial institutions are now investing in digital assets, as of March 21, 2024. (Amphibian Capital)
Immediately before and after the halving, however, Bitcoin tends to weaken for approximately 15 to 45 days. Considering that major financial institutions, with combined USD 36 trillion of assets under management, are just beginning to invest in digital assets and build Bitcoin allocations in client portfolios, the supply/demand balance may increasingly shift. Higher Bitcoin prices thus seem inevitable in the further course of the year.
Bitcoin ETF inflows and outflows, as of March 21, 2024. (Bitmex)
However, in the short term, Bitcoin is approaching the “pre-halving danger zone,” during which, historically, pullbacks ranging from 20% to 40% have been observed 14 to 28 days before the halving. It is noteworthy that ETFs, likely due to consistent liquidations of positions in the Grayscale Bitcoin Trust (GBTC), recently recorded a cumulative weekly outflow of approximately USD 94 million.
Technical Analysis for Bitcoin in US Dollar
Bitcoin Weekly Chart – Only a weekly closing price below USD 57,000 would decisively alter the picture.
Bitcoin in USD, weekly chart as of March 23rd, 2024. (Tradingview)
Since the low at USD 15,479 on November 21st, 2022, Bitcoin prices have soared by a sensational +376.7% to a new all-time high at USD 73,794 within just 13.5 months. Thus, the bear market is unequivocally over!
While the entire rally until mid-October 2023 proceeded relatively smoothly, it was the anticipation, approval, and eventual trading launch of the Bitcoin spot ETFs that triggered a nearly vertical price surge. Vertical price hikes are a dream for invested traders, yet they also increase the risk of significant pullbacks. After all, rallies are born in panic and always end in total euphoria and exaggeration. From this simple perspective, Bitcoin prices around USD 70,000 should be approached with healthy grain of caution.
On the weekly chart, the vertical price surge to USD 73,793 has recently resulted in a sharp, yet so far manageable pullback to USD 60,760. However, this has generated a sell-signal on the weekly stochastic. The broad resistance zone between USD 58,000 and USD 69,000 could potentially keep Bitcoin occupied longer than many currently anticipate. At the same time, the rally remains intact as long as the USD 57,000 mark is not breached on a weekly closing basis.
In summary, the weekly chart remains bullish. Nevertheless, first sell-signals are creeping in. We suspect that Bitcoin will likely oscillate in a pretty volatile manner within the upper half of its uptrend channel between USD 57,000 and USD 77,000 throughout spring and early summer.
Daily Chart – Building a base above USD 60,000
Bitcoin in USD, daily chart as of March 23rd, 2024. (Tradingview)
On the daily chart, the anticipated head & shoulder formation turned out to be a clear misjudgment. With the breakout above USD 50,000, prices surged unstoppable upwards, reaching a new all-time high at USD 73,793.
The pullback since March 14th marked the first clear sell-signal from the stochastic since January 11th. This sell-signal remains intact thus far. The oscillator has not yet fully entered its oversold zone, suggesting the possibility of further short-term weakness. Additionally, the rapidly rising 200-day moving average (USD 41,588) is well below the current price action and probably a bit too far away to justify current rather lofty price levels.
Overall, the daily chart is currently bearish, indicating the continuation of the correction or consolidation in the short term. However, new lows below USD 60,760 are not yet foreseeable, especially since the daily stochastic has almost reached its oversold zone. A volatile back-and-forth between approximately USD 61,000 and USD 67,000 could be sufficient to build a base and to then generate a new contrarian buying signal within a few days.
Sentiment Bitcoin – Excessive optimism initiates pullback
Crypto Fear & Greed Index long term, as of March 20th, 2024. (Lookintobitcoin)
With 88 out of 100 points on March 14th, the “Crypto Fear & Greed Index” reached its highest level since February 21st, 2021. Thanks to the recent pullback, this significantly excessive optimism has receded considerably.
CMC Crypto Fear & Greed Index as of March 20th, 2024. (Coinmarketcap)
CoinMarketCap’s “CMC Crypto Fear & Greed Index” further highlights the exaggeration of recent weeks. Perhaps the pullback has already initiated a significant adjustment in sentiment, suggesting that the entire crypto sector could face some challenging weeks, possibly even months ahead.
Overall, sentiment has been overly optimistic lately. It’s only when sentiment values return to neutral that contrarian buying opportunities arise.
Seasonality Bitcoin – Favorable seasonality until early June
Seasonality for Bitcoin, as of March 21, 2024. (Seasonax)
Between mid-March and mid-April, Bitcoin has historically traded sideways. According to seasonal analysis, a new uptrend should only be expected to start in the second half of April. However, the statistics indicate that the next significant buying opportunity for Bitcoin may not occur until September or October.
In summary, seasonality remains neutral until mid-April. Only after that, and until the second week of June, will the signs turn green or bullish again.
Sound Money: Bitcoin vs. Gold
Bitcoin/Gold-Ratio, weekly chart as of March 23rd, 2024. (Tradingview)
At prices of USD 65,250 for one Bitcoin and around USD 2,165 for one ounce of gold (XAUUSD:CUR), you would currently need approximately 30.13 ounces of gold to acquire one Bitcoin. Conversely, an ounce of gold costs approximately 0.033 Bitcoin.
As a result, gold as well as the SPDR Gold Trust ETF (GLD), the iShares Gold Trust ETF (IAU) and the Sprott Physical Gold Trust (PHYS) have once again had to yield significantly against Bitcoin over the last two months. Overall, the Bitcoin/Gold-ratio has increased by 279.4% in favor of Bitcoin since November 22nd, 2022. Instead of 9 ounces, one now needs more than 30 ounces of gold for one Bitcoin! However, the ratio has not yet reached its peak of 37 ounces from October 18th, 2021.
While the steep price increase of recent weeks seems to call for a healthy pullback, there is no sign of an end to Bitcoin’s outperformance against gold. Should there be a larger pullback, the area around 24 seems poised to act as a support level. This area also coincides with the upward trendline since October 2023.
Overall, the Bitcoin/Gold ratio appears somewhat “toppy,” and a healthy pullback would be appropriate. At the latest, the ratio should find support in the range between 23 and 25.
Macro Update – Sticky inflation continues to fuel the crack-up boom
S&P in USD, daily chart as of March 23rd, 2024. (Tradingview)
Since its low on October 27th, 2023, the American stock index S&P500 has surged by a whopping 1,165 points, or over 28%. The hype surrounding artificial intelligence, along with hopes of interest rate cuts, has fueled an incredible rally, adding around USD 10 trillion in market capitalization. This “currency” created “out of thin air” keeps inflation high because rising stock portfolios also reignite consumer spending.
However, only one in four Americans owns and trades stocks. The remaining 75% of the US population, on the other hand, is facing constantly rising prices and a struggling real economy in many areas. The situation is even worse in Germany, where only about 17.6% of the population aged 14 and older are invested in stocks, while the country has slipped into a recession. This means that only one in six, if at all, has been able to participate in the rally in the DAX to new all-time highs (18,233 pints). However, approximately five million German citizens also hold Bitcoin. This disparity between winners and losers in terms of inflation continues to widen.
The markets are in a speculative frenzy
Given the significantly increased markets, further interest rate cuts are unlikely for now. Instead, the US Federal Reserve is trying to keep the markets happy with promises, without actually taking concrete action. It’s hard to gauge how long this will last in light of the ongoing banking crisis and the persisting problems in the US commercial real estate sector. Only an increase in the unemployment rate above the forecasted 4% for 2024 and wage growth below 4% would likely lead to an immediate easing of US monetary policy.
Obviously, the markets are in a speculative frenzy and party mood. Nvidia may even reach the psychological milestone of USD 1,000, but the valuations of some tech stocks have become quite steep. In any case, the favorable seasonal window is slowly but surely coming to an end in the next six weeks.
After that, the old adage “Sell in May and go away” comes into play because generally, stock markets tend to be subdued between May and September. After the mega-rally, a breather over the summer would be healthy. Given the new dominance of the Spot-ETFs, Bitcoin is unlikely to sustainably avoid such a correction or breather in the stock markets. After all, the correlation between Bitcoin and the Nasdaq has increased significantly over the last six months.
Bitcoin – Potential correction despite ETFs and Halving
Together with the overbought condition, the extremely high recent optimism levels, and the likely upcoming correction/consolidation in the stock markets, we see good chances that Bitcoin will become significantly cheaper once again.
Overall, however, the crack-up boom continues. Theoretically, a brief pause in the markets during the summer could already put pressure on the Fed, as market participants are currently so spoiled that even a 5% to 10% pullback in the stock markets could potentially cause panic.
Conclusion: Bitcoin – Potential correction despite ETFs and Halving
After the extreme rally of the past two months, Bitcoin has reached a short-term top at USD 73,793. There are increasing signs that this could be an important medium-term peak.
While the first test of support around USD 60,000 held up solidly, a second attempt is likely to break through to the downside. After all, the USD 60,000 mark represents only the absolute minimum Fibonacci retracement (23.6%) of the entire rally from the lows of USD 15,479 in November 2022! Therefore, the bulls must avoid any approach to this round psychological level.
Different scenarios, but Bitcoin above 100k at some point very likely!
A more likely scenario would be a typical retracement to the 38.2% retracement level, which awaits around USD 51,500 USD. And a still entirely normal pullback towards the 61.8% retracement could even lead Bitcoin back to approximately USD 38,000.
Very bullish scenario for Bitcoin in USD, 2-week chart as of March 23rd, 2024. (weslad on Tradingview)
Of course, we must first wait to see how demand from ETFs will develop in conjunction with the “halving”. Furthermore, rapid spikes towards and above USD 70,000 are still possible at any time. However, we doubt whether the forces will be sufficient for significant new all-time highs above USD 75,000 to USD 77,000 by summer.
Bitcoin in USD, potential cup & handle-scenario, as of March 23rd, 2024. (Tradingview)
If the correction or consolidation would unfold as a “cup & handle pattern”, the entire correction/consolidation process could take about three to nine months. This would result in a potential time projection towards September or October 2024 with a potential price target of USD 51,500 for the final low. Of course, this would be an outstanding buying opportunity before Bitcoin should head towards USD 100,000 and higher.
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