Bitcoin Bulls Finish 2023 On Top – Crypto Piece
Sorry Bears, Better Luck Next Time
Note: Our Cycle Forecasts product has been showing promising traction. It has helped us call the entire run-up in the S&P 500, Tech and Bitcoin. We strongly encourage our members to try these Cycle Forecasts to better time the markets. It also includes our “Secret Sauce” proprietary Cycle. More information on the product can be found here. Now back to Cryptos!
Bitcoin is up nearly 170% just in 2023. While investors were waiting for $12k back in January 2023, Bitcoin had other plans. Now at $43.6k, a lot of investors are flipping bullish. Media outlets are pushing the Bitcoin ETF narrative as an extremely bullish sign. While this may be true in the long run, the charts don’t support this narrative in the near term. In our opinion, if Bitcoin ETF gets approved in January 2024, it’ll be a sell the news event, albeit with a potential initial pump that gets sold-off quickly.
Bitcoin has been forming strong bearish RSI divergence since late-October. Notably, it has already formed 2 drives, and likely to form a 3rd drive if price gets around $47k (our next target). A 3-drive bearish RSI divergence is typically very powerful, resulting in sharp down moves. Therefore, while we’re cautiously optimistic on the current bullish trend, any closes below $41.2k region should be seen as a major red flag. For now, the trend is your friend and we still believe that $47k is the next move.
Intermarket Analysis: USD ($DXY)
$DXY has comfortably broken below its range mid-point and is moving down to range low. This provides further confluence for one more leg up in Bitcoin. However, range low is where a more meaningful bounce for $DXY is possible, which would also indicate a pullback in Bitcoin. Even our Cycles show that $DXY is likely to bounce from the beginning of 2024. More details on these Cycle Forecasts can be found here.
Bitcoin Local Top Nearing
The Puell Multiple is an on-chain indicator that explores Bitcoin cycles from a mining revenue perspective. It is calculated by dividing the daily issuance value of bitcoins (in USD) by the 365-day moving average of daily issuance value. Extremely high levels occur near market tops and low levels near market bottoms.
Of note is the 2.39 level (black line below). Whenever the Puell Multiple comes from the green zone following a bear market to the 2.39 level, it has marked a local top in Bitcoin. It happened in 2012, 2016, 2019 and on track to happen in 2024. Remember, this does NOT mean the end of the bull market, but just a period correction before Bitcoin has its next leg higher.
Interestingly, even our Cycle Forecasts is showing a Bitcoin local top around 7th January 2024, right around the time when the Bitcoin ETF is anticipated to get approved. You can get the entire Q1 2024 Cycle Forecasts at https://cyclesedge.com/
Bitcoin Related Equity Bets
Bitcoin can also be played via equities through Bitcoin-related companies like exchanges and miners. On 23rd November, in an article titled “Tick Tock, Bulls Rock – Crypto Piece”, we had highlighted this Coinbase chart with the Amazon fractal over it:
This is how it played out:
Coinbase rose from $109.25 to $169.70 (at the time of writing) with the fractal suggesting that there’s still more upside in the near term (around $206). While this fractal may break at some point, for now it seems to be doing a fantastic job at providing a basic blueprint.
In our last Crypto Piece, we had also highlighted the inverse head and shoulders setup on a Bitcoin miner named Marathon Digital Holdings ($MARA). Back then, $MARA was at $17.82. The chart below is from our last Crypto Piece:
Since then, $MARA has broken out of its inverse head and shoulders pattern and has reached $24.78. For those of you that missed this move, DO NOT chase this move. Here’s how you can play it instead: