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Thesis Summary
Bitcoin (BTC-USD) has been trading in an increasingly tight range over the last few months. Eventually, Bitcoin will have to decide, but the ultimate result will be the same either way. Bitcoin needs to find a new low before all-time highs are reached again. It is also evident by on-chain metrics and continued adoption that Bitcoin is heading up in the long run.
The Big Picture
Though it may not seem like it, Bitcoin has been in a bear market for well over a year now. In March 2021 Bitcoin reached $64,000. Following that, Bitcoin fell over 50% and then went on to reclaim an even higher high in November. However, I view this as part of a corrective structure, which, as mentioned above, started a year ago.
Bitcoin Long-term (Author’s work)
In this regard, I would like to see Bitcoin break the low it formed in that A wave. This should target at least the 0.382 fib extensions, which takes us around $27,000, and should not go lower than $20,000. This represents the top of the last bull cycle, in 2018-2017, and it also coincides with the 200-week moving average. Bitcoin has tapped this level in previous bear markets.
Where Do We Stand Now?
Having said this, let’s look at what Bitcoin is doing in the smaller time frame.
Bitcoin short-term (Author’s work)
This is the 2-hour chart on Bitcoin. First off, we can see a five wave structure forming from the top of the larger B wave. Currently, I believe we would be in wave 4. Within this wave 4, we can also see that Bitcoin has been trading inside what we could call an ascending triangle. Now, within this triangle, we can also see an A-B-C-D-E forming, which would suggest that Bitcoin will retest the resistance at about $45,000, and then exit the triangle to the downside. The key levels to watch out for the downside, are $39,000 and $37,000, which are the 50% and 61.8% retracement of wave 4.
Lastly, it is also interesting to look at the Volume Profile Visible Range, which is the histogram on the right. As we can see, there is a particularly high volume at that $39,000, which is also the bottom of that triangle.
Bitcoin has to break out of this triangle one way or another. My expectation is that we go lower, but even if we break out to the upside, I would only view this as a continuation of a correction. Bitcoin should make lower lows in order to make new all-time highs.
Underlying Strength
In any case, I advise getting some exposure to Bitcoin. What seems inevitable, in the long run, is that Bitcoin is heading higher, and this is also supported by on-chain metrics and increased adoption.
Supply has been increasingly shifting into long-term holders, which has been made clear by the continued outflows from exchanges. Also, we are seeing increased whale activity, which in the past has been a strong indication that the price is ready to move up.
And of course, companies and institutions continue to slowly gain exposure to blockchain and Bitcoin. The Goldman Sachs Group (GS), recently made its first over-the-counter Bitcoin trade. Also, Crypto.com, one of the largest exchanges in the world, is now in the initial phase of its US launch.
Final Thoughts
The stage is set for Bitcoin to make new highs soon, but I would like to see one more low before that happens. We should have more clear evidence of where Bitcoin is heading in the next week.
With that said, it’s important to consider that a lot of altcoins have already reached ideal bottoming targets and have staged convincing reversals. A lot of these cryptos have even higher return potential than Bitcoin, which is why I am taking this time to slowly layer into other cryptocurrencies.
