Flirting with the Upside

Uncharted 49

Dear Subscribers,

Bitcoin beat history in September, which could be bode well for its performance in the month ahead as cryptos start October on the right foot.

In this Uncharted:

• We dive into the latest price rally above $28k for the first time since August as the cryptocurrency market got a boost after the U.S. avoided a government shutdown.

• We go over the growing bitcoin dominance hints at a capital shift towards BTC, while a relatively high Alt Signal suggests profit-taking and a preference for bitcoin's liquidity amid rising uncertainty in traditional finance.

• We analyse the federal judge decision to reject the U.S. Securities and Exchange Commission’s bid to appeal its ground-shaking loss against Ripple, the crypto company associated with the XRP token.

Let’s dive in!

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State of the System

Let’s recap where we left off in Uncharted 48, from September 22nd, with bitcoin starting to show off strength in the system: “There is significant resistance around $27.4 - $27.5k, which requires great power to break. We lack the necessary momentum at the moment to break over. Could this be the beginning of the end (of the correction)? We are back within the bullish quadrant.”

Despite strong headwinds, we are back within the bullish quadrant as bitcoin holds over $27k. The risk of a pronounced drop has eased, but bitcoin's momentum is gradually losing steam. We might be at the beginning of the end of bears' control, but the environment is volatile. Holding the line ($27k) is key for further upside.

Figure 1: State of the System

We are at a key level, serving as a long-term pivot point. A hold over $27k would impede bearish momentum from building up and confirm the breakout of the previous range ($26 - $27.1k).

Short-term, we likely see a consolidation between $27 - $27.5k - with potential wicks to test $26.7k - as the price needs to take a breather - and $27.8k. Yet, a retest of the lower end wouldn't be the worst-case scenario, as a consolidation over $27k would trigger a full-blown bullish trend and momentum.

Figure 2: Bitcoin’s Price in Context

In the mid-term outlook, a retest of the $26k level is in the books if we break below $26.7k.However, we must acknowledge a regime change as per the RSI. Unlike the explosive moves we've seen throughout 2023, the RSI has been building steadily. The structure resembles a basing phase, as seen in Q4 2022.

We are retesting the breakout and bottom, just like on Dec 14, 2022, that led to the beginning of the 2023 bullish structure. Could this be the base for the next strong move higher?

Figure 3: Bitcoin’s Price Evolution with Cipher B, RSI and ATR indicators.

From a risk perspective, we're setting up for another move-up. The Risk Signal dropped aggressively from 100 with some volatility, like before the stellar 2023 kicked off. So, what needs to happen to confirm this basing and bottom phase?