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The world’s largest cryptocurrency by market capitalization is on the brink of a breakout to the psychologically important $30,000 level, possibly the next major resistance zone, according to technical analysts watching the Bitcoin market in the short term. looks like it’s headed for About $32,500 to $33,000.
Looking at BTC/USD on the 4-hour candlestick, it looks like a bullish ascending triangle pattern is forming. These technical patterns often form before a bullish breakout.
Bulls should be careful, but Bitcoin has formed a similar pattern across 16 currencies.th and 21st However, it failed to move up (for the foreseeable future anyway) and instead spent the next few weeks down again.
Traders look ahead Federal Reserve Policy Meeting Wednesday As a catalyst for the next potential bull run.
The bank is expected to raise interest rates by another 25 bps to a range of 4.75-5.0%, but it may be able to hold rates amid concerns about cracks in the US banking system.
Analysts argue that whatever the outcome (hawkish or dovey), Bitcoin could be profitable.
On the one hand, the hawks in the Federal Reserve could exacerbate the banking crisis, further fueling the safe-haven appeal of Bitcoin (which has been a significant tailwind and is).
On the other hand, a dovish Fed could ease financial conditions and boost Bitcoin (and the broader cryptocurrency market).
While many bulls are confident in Bitcoin’s near-term outlook, further short-term gains are on the horizon given that many indicators point to the Bitcoin market heating up. It may be wise to moderate the expectations of
Bitcoin market is very hot right now
Bitcoin’s 14-day Relative Strength Index (RSI) score has moved from oversold to overbought territory ( (defined as 70 or more).
Bitcoin’s RSI was around 71.5.
This does not necessarily mean that the market cannot continue to rise. January 10ththBitcoin’s RSI was pushed into overbought territory, but the price rose anyway by the end of the month from $17,500 to around $23,000.
Elsewhere, Bitcoin is trading at historically significant level gains against many of the major moving averages. BTC/USD is up about 18% against the 21-day moving average (DMA), 19% against the 50DMA, 32.5% against the 50DMA, and 40% against the 200DMA.
This is the biggest rise for the cryptocurrency compared to the 100 and 200 DMAs since late 2021 when Bitcoin hit all-time highs. On the other hand, this is the closest to Bitcoin’s rise this year since the 21DMA and 50DMA.
Another way to look at the momentum of the Bitcoin market and assess whether the cryptocurrency is overstretched is to look at the Z-score at 200DMA.
This is basically the number of standard deviations Bitcoin is above its average price over the last 200 days (at the current price).
Bitcoin’s Z-score for 200DMA recently crossed 3. This means that at the current levels above $28,000, BTC/USD is more than 3 standard deviations higher than the average price over the last 200 days.
This is a rare occurrence in Bitcoin’s history and usually only occurs during aggressive bull markets.
Recent history suggests that a Z-score above 3 does not necessarily mean an imminent adjustment.
In late 2020 and early 2021, Bitcoin’s Z-score was above 3 for an extended period of time, during which time BTC’s price continued to rise exponentially before finally starting to level off.
Bitcoin trading well above various “fair value” metrics
Another way to assess whether the Bitcoin rally is overheating is to look at where the current Bitcoin price is trading and its historical relationship with correlated traditional asset classes. It is the comparison of various estimates of the “fair value” of a currency.
The graph below shows how much Bitcoin has moved up and down relative to fair value estimates given Bitcoin’s historical relationship with the S&P 500, DXY, US 2-Year Yield, and US 10-Year Yield over the past 60 days. It shows whether you are trading on Market values are calculated by regression analysis.
Bitcoin is currently trading around 30% above the fair value of each of these assets, nearing its highest level since early 2021. At the very least, this suggests that the Bitcoin market is very hot.
Can the Bitcoin Market Stay Hot?
Various indicators suggest that things are really heating up, but history shows that things could get even hotter.
The RSI has been higher for longer and more sustained periods.
Bitcoin has been trading above the major moving averages for the duration of the bull market.
Bitcoin’s Z-score for 200DMA has also held up longer than its current level, simply comparing various measures of Bitcoin’s price and its short-term fair value.
Meanwhile, various on-chain indicators related to network activity, USD-denominated Bitcoin wealth balance across wallets, Bitcoin market profitability, and all bull market signals, as discussed in a recent article. .
If we really are facing a new global financial crisis and central banks like the Federal Reserve are being forced to start cutting rates again/back to quantitative easingthe Bitcoin bull market could still go into overdrive.
