Bitcoin has been trading above $50,000 for quite some time from where it has a hard time paving the way around $60,000, but the broader crypto market is benefiting from the consolidation of the biggest cryptocurrency. There is growing investor activity in the so-called altcoin market, primarily Ethereum and other relatively large cryptocurrencies like Cosmos, Polkadot and Uniswap. Now investors expect that the current cryptocurrency cycle will be no different from previous ones. Historically, Bitcoin did best at the beginning of the bull market, then Ethereum beat it with returns, until finally altcoins exploded overtaking both Ethereum and Bitcoin. Now the market seems to be going through phase two, and Glassnode has signaled this as well.
- Admittedly, on-chain data signals Bitcoin selling by long-term, large investors, but this behavior remains characteristic of bull market phases and historically has not resulted in dynamic depreciation. While unrealized profit levels, by short-term BTC holders statistically inclined to sell remain high, they have been so for many weeks and so far have not resulted in sudden discounts or declines that could herald an attempted trend reversal.
- Bitcoin is due for a halving in roughly 1.5 months, and many analysts suggest that the 'pre-halving sell-off' characteristic of previous cycles has already occurred in January, when the market realized significant gains following the SEC's approval of ETFs. As a result, we are seeing growing speculative interest in altcoins, and although Bitcoin is losing 0.8% today, capital is clearly looking more favorably toward riskier, smaller cryptocurrencies.
- As long as the overall sentiment around BTC is upbeat, and hopes for a bull market in 2024 are only growing, the market will look for 'more efficient' digital assets than Bitcoin itself, accepting higher risks. We have also seen long-term yields fall recently, signaling that the Fed may return to a positive for Bitcoin and negative for the dollar and yield normalization of policy in the second half of the year. On the other hand, Wall Street sentiment is incredibly optimistic at the moment, and the correction may involve fund outflows from ETFs, illustrating not only the benefits, but also the risks, associated with Bitcoin accumulation funds.
Bitcoin chart (D1)
Looking at the chart of Bitcoin, on the daily interval, we see that on the side of Fibonacci's retracements, the key support level in a downward scenario is the $44,000 level. At this level we observe the 23.6 Fibo of the upward wave from the fall of 2022, the average SMA100 (black color) and important on-chain levels in the form of the average purchase price of BTC before short-term investors. As long as the largest cryptocurrency is above $50,000, the base case scenario for the market is a further decline in BTC's dominance, which supports inflows into Ethereum and the other, smaller cryptocurrencies. A drop below $44,000 could lead to a test of the trend line, at the SMA200 (red line). On the other hand, another upward impulse could take Bitcoin above $60,000, and this is the scenario estimated by Matrixport analysts, for March 2024.
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