COTD: Bitcoin up 30% in 3 days!
Bitcoin is showing strength in the face of banking volatility.
Today’s Chart of the Day is going to be quick.
On January 21, 2023,
published a piece titled, “Has Bitcoin bottomed?”. At that time, a number of trends were combining to suggest the probability was high that the bottom for the cycle was in. It seems the probability of this being true is only growing with time. Here’s a TL;DR summary of the analysis from January:Bitcoin's price has finally started to look constructive after a 75%+ decline over a year, according to technical, sentiment, and fundamental analysis.
Technical analysis shows that Bitcoin's price is now bullish since it has formed a bullish falling wedge formation and recaptured the prior cycle highs.
Sentiment analysis indicates a change as bad news no longer has a negative impact on Bitcoin's price, and the magazine cover sentiment indicator has been useful for calling turning points in Bitcoin's price.
Fundamental analysis shows that Bitcoin's hash rate and network difficulty have hit new all-time highs, and long-term relative valuation metrics suggest that Bitcoin is at levels where it has historically formed a significant bottom.
Here is the link to the full post, check it out:
Figure 1 shows the weekly chart of the bitcoin price.
The price is up approximately 30% over the previous 4 days, rising in the face of banking sector volatility, as Signature Bank, Silicon Valley Bank, and now First Republic Bank have failed or are on the verge of failing.
Technically speaking, the price bounce off support from a now rising 200 day moving average and support from the old, 2017 all time highs of $20,000. After spending nearly 14 months below its 200 day moving average, bitcoin is now solidly back above it and accelerating to the upside — the sign of a brand new uptrend. Sentiment is still poor, as pointed out in “Has Bitcoin bottomed?”, providing fuel for a potential continuation of the upside.
Why is the price rising? I believe it is a combination of exhausted bears after a year long bear market, combined with bond markets that seem to be pricing in the probability of lower inflation and a Federal Reserve pause / pivot — in other words, a world with lower rates is better for the price of bitcoin and other similar assets, such as gold. When rates are low bitcoin, an asset that doesn’t generate a yield or cash flows, does not find it as difficult to compete for capital against assets that can offer safe yields — such as savings accounts, CDs, and short term bonds.
Again, please read “Has Bitcoin bottomed?” for a much more detailed analysis of the sentiment, technicals, and the fundamentals contributing to my bullish leanings.
Bitcoin is extremely volatile, but for now, the path of least resistance seems to be higher.
— Brant
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