Crypto's Resilient Phoenix

Uncharted 51

Dear Subscribers,

Bitcoin is attempting to ditch the past week's trading range, but longer timeframes reveal the potential for much more BTC price upside as bitcoin looks to finish a rally for the end of the year.

In this Uncharted:

• We dive into bitcoin’s currently consolidation above $35k post FOMC as researchers at Matrixport predict 65% rally to $56k by year-end.

• We review the Federal Reserve (Fed) and Chair Jerome Powell's commentary on the decision to keep rates unchanged, indicating a pause in monetary policy.

• We analyse the early stages of a bull market, with bitcoin's dominance at a yearly high, driving the market, while potential regulatory developments, like a Ripple lawsuit victory or approval of a BlackRock BTC ETF

Let’s dive in!

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State of the System

Since our previous Uncharted, bitcoin has crushed significant resistance levels and logged a new yearly high.

“Bitcoin is going full steam, breaking over to the long-awaited $28k range, where it's holding firm. Momentum has turned bullish, and the risk of a pronounced drop is relatively low. It seems we can face some resistance in the short term, but the mid-term is stronger than ever. Is this the beginning of another strong move up?”

This week's bitcoin price came within a hair of the $36k mark before abruptly reversing course and correcting to $34.25k. After a near 30% run over the past month, it is natural for the price to cool off as some traders take profit and market participants evaluate whether or not the catalysts for the rally remain valid.

We're deep within the bullish quadrant, in a state of strengthening momentum and a low risk of a pronounced drop.

Figure 1: State of the System distinguishes between bullish and bearish regimes and transitions depending on bitcoin’s performance.

In our previous edition, we analyzed our proprietary regime shift and concluded that we were transitioning from a bearish to a bullish environment. The weekly chart reinforces our view. A long-term bullish trend was confirmed, momentum is building up, and from the looks, it's only the beginning. Notice how the last time RSI crossed 70, bitcoin exploded. The RSI is now beginning to be overbought and could stretch higher toward the 100 mark, as it is the norm with bullish markets. In other words, as long as it sustains the uptrend, the BTC price would be inclined to keep the rally intact.

Figure 2: BTC's price evolution with Cipher B, RSI and ATR indicators.

We must remember that nothing moves in an up-only manner, and we're, in a way, in Uncharted territory. Therefore, it's essential to define the critical ranges to identify attractive entry and exit levels.

Short-term support is forging around $33.7k, with a pivot point at $34.4k. In the mid-term, however, we could see a retest of the $32.7 - $33.3k level. Remember that volatility is high, so that we could see wicks below our current support levels. The BTC bulls still have a solid near-term technical advantage as a price uptrend is on the daily bar chart.

Resistance, on the other hand, is around $36 - $37k in the short term and $40k in the mid-term.

Figure 3: BTC price evolution and Trading Volumes.

In the worst case scenario, the price could retest the $31.5k breakout level. However, the odds of breaking below the said level are relatively low, according to the Risk Signal. There will likely be a retest of a lower level once we hit our resistance levels, yet a pullback beyond $33.3k seems unlikely. If said level hits, we need to analyze the risk signal and determine whether it's a bottom and the ultimate buy level before bitcoin continues higher.

Figure 4: Bitcoin Risk Signal is a proprietary signal that gauges the amount of risk of a major drawdown in Bitcoin price.