Bitcoin recent price action excited a lot of crypto enthusiasts. Many went ahead to post numerous views and expert theories on social media trying to predict the Bitcoin price action. Some X accounts are calling this a pre-halving rally.
FYI, Bitcoin price action follows a pattern according to many X experts. And, most theories revolve around Bitcoin halving. Bitcoin 'halving' is the term used to denote the halving of rewards to Bitcoin miners. As the rewards to Bitcoin miners halve after about ervey four years, Bitcoin becomes more and more scarce. Selling pressure to Bitcoin price gets reduced, ultimately leading to Bitcoin price rising after halving. There can be only twenty one million Bitcoin. Thus, Bitcoin becomes more and more scarce with every halving.
According to many experts, Bitcoin price action is divided into different phases. One expert on X posted a useful infographic
1. Bear
2. Pre-Bull
3. First Bull
4. Second Bull
While the above description looks great, it is hard for many to ride the entire cycle and benefit. That's because above is over-simplified version of the price-action. Often, the journey to the top is filled with many corrections often as deep as 50 to 80 percent. Many tend to get greedy and trade altcoins or memecoins for bigger gains. Let's park the discussion about riding the cycle for other day and focus on whether there is any reason to get excited about Bitcoin recent price action. For this, we will have to dive in the charts and learn about what's happening with the macroeconomics overall.
What are the charts telling us🤔
The long term charts always tell clearer story while avoiding a lot of noise. Below is the all time chart of Bitcoin with monthly candle-sticks.
Notice the key resistance on the monthly chart. Good news is that key level of 32,130 has been broken on daily closing basis.
However, does it change a lot and should get us excited about the upcoming rally? Technically speaking, following things need to happen to count this as a qualified rally for excitement.
1. MONTHLY CLOSING above key level of 32,130
2. Break above key level of 37,441 on WEEKLY/MONTHLY CLOSING basis
If above two things happen, the Bitcoin chart will start looking more enticing as there will be a lot of substance in that rally. While optimism and enthusiasm are good things, but techincally speaking, right now it is too early to be excited about Bitcoin price!
How are Macros and Global Markets looking like?
The macroeconomic environment is not looking very supportive for a parabolic rally in Bitcoin price. Below mentioned concerns remain in global markets in short to medium term:
1. US 10 year bond yields trading high: The bond yields are multi-decadal high indicating that market is pricing in a high interest rate regime for an extended period. Bond yields need to cool off to give a conducive environment for bitcoin price to rise
2. Interest rate reduction cycle: Bond yields are not high on their own. They are high because it looks like the Federal Reserve is not going to start cutting the ineterest rates anytime before Sep 2024. This is because while inflation in the US is showing a downward trend, but is still not under the Fed's target range of two per cent. Also, other economic data like unemployment numbers, GDP growth etc still indicate economy is in robust shape. This leads Fed continue to believe that interest rates need to remain high for inflation to come under control.
3. Israel-Hamas conflict: The conflict between Isarael and Hamas potentially bears the risk of spreading in Middle East. This may escalate tensions further as other countries like Iran, Saudi Arabia etc may join the war, complicating the matter further. A war in middle east directly has bearing on the oil price as the region is major producer of oil. Higher oil prices mean higher inflation. Thus, further delaying the chances of any interest rate cut by the Fed.
Conclusion:
While techincal levels on Bitcoin have breached, some major levels need to be broken before some serious excitement comes in the rally. Also, the macroeconomic situation is not directly indicating an environment which could help push bitcoin price. That said, Bitcoin is not owned by any sovereign and is censorship-resistant. Hence, it should earn it's truly deserved position of a true hedge. Who knows the price of this 'digital gold' may increase if world starts to realise the true potential of Bitcoin anytime soon!
Comments
Post a Comment