Market analysis

Fundamental perspective on BTC - medium-term market overview

By Team Exness

29 February 2024

blockchain

Gan Li Xing, CMT, CFTe - Financial Markets Strategist

Amidst the excitement of the ongoing Bitcoin rally, with prices soaring to historical highs, one question looms: Is this rally sustainable? Bitcoin's resilience and bullish sentiment can be attributed to two key factors: the ingenious mechanism of Bitcoin halving and the growing cryptocurrency adoption by investors, particularly following the introduction of Bitcoin exchange-traded funds (ETFs).

At the core of Bitcoin's resilience lies the concept of halving, a process that occurs roughly every four years. Halving events reduces the flow of new Bitcoins, cutting miners' rewards in half. This intentional scarcity acts as a magnet for demand, as investors view Bitcoin as an increasingly valuable asset. 

Following the most recent halving in 2020, Bitcoin's issuance rate dropped from 12.5 to 6.25 Bitcoins per block. This reduction in supply, coupled with heightened demand, has historically sparked significant price rallies. Notably, after the 2012 and 2016 halvings, Bitcoin's price surged by over 8,000% and 2,500%, respectively, within two years of each halving event. Such historical data underscores the profound impact of halving events on Bitcoin's value trajectory, solidifying its reputation as a hedge against inflation and a reliable store of value.

Furthermore, the surge in institutional recognition of Bitcoin's investment potential is remarkable. In recent years, prominent players like MicroStrategy and Tesla have allocated substantial portions of their treasury reserves to Bitcoin, signaling confidence in its long-term prospects. 

Moreover, the debut of Bitcoin ETFs will offer investors a regulated avenue to access Bitcoin, further legitimizing it as a mainstream investment asset. The launch of these ETFs has generated excitement, with growing support from retail investors. This enthusiasm is evident in the trading volume of 10 Bitcoin ETFs, which reached a record high of $7.69 billion USD. This milestone highlights the increasing interest in regulated avenues for Bitcoin exposure and marks a significant step forward for the cryptocurrency market as a whole. 

In summary, Bitcoin's scarcity can act as a hedge against inflation, and the launch of regulated Bitcoin investment vehicles could buoy demand, marking the beginning of a sustained bull run in the future.

Technical perspective on BTC - medium-term market overview

María Agustina Patti - Financial Markets Strategist

BTCUSD rally

The BTCUSD rally has been impressive, and Bitcoin’s price reached new highs that it had not tested since December 2021. While the rally has been strong, there are concerns about the sustainability of the price increase and the possibility of a correction.

Although this rise has been driven by fundamentals such as greater demand from institutional investors following the launch of spot Bitcoin exchange-traded funds, as well as the possibility of interest rate cuts by the Fed and the halving planned for April of this year, it would be interesting to validate it also from a technical point of view.

BTCUSD Chart: Daily timeframe

Levels to consider as possible resistances

Bitcoin’s price is showing an upward trend with sharp movements that have occurred in recent days. After breaking the bullish upward channel, the price seeks to test again the resistance level around 58,000, which is an important psychological level as well as a resistance that was already tested in December 2021.

The bullish movement is also confirmed by the price breaking above the 200-period moving average on the daily chart. It is worth mentioning that since the break of the upward moving average after the minimum reached in November 2022, the price has remained in an upward direction, with moments of price consolidation, such as the lateral channel from March to October 2023.

If the first upward resistance level is broken, the next level to watch is around 65,000, reached in November 2021.

Levels to consider as possible supports

Although the analysis suggests that the bullish trend will continue, we could expect some downward correction in the short to medium term. On one hand, the price is approaching the immediate resistance line around 58,000, while the RSI is in the overbought zone, marking a bearish divergence with respect to the price chart, as seen on the daily chart.

On the other hand, it is worth noting that the bullish force of the market, which is observed through the presence of several bullish marubozu candles in recent days, could create an imbalance in the markets, predicting a possible profit-taking that could occur in the form of a countertrend correction.

If a downward movement occurs, the next levels to observe would be around 52,000, prior to the level around 48,000.

Technical summary

While technical analysis suggests that the uptrend will continue, it is advisable to wait for the next correction to enter buy orders. If the price corrects lower after reaching 58,000, the possible price correction levels could be found at the Fibonacci retracement levels, which coincide with previous supports.


This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.


Author:

Team Exness
Team Exness