Analyzing the Charts: Bitcoin Looks Ready for Liftoff

21 ott 2023

Greetings everyone! I hope you all are doing well. I have recently updated many of my previous ideas about the markets, including bitcoin, crypto, and traditional markets. I was bullish several months ago, and I remain bullish. The market currently looks extremely explosive for reasons I will explain.

First, as I mentioned previously, a Bitcoin ETF is on the horizon. Given Grayscale's legal victory and actions by several ETF providers, the probability of an ETF being approved is around 90-95%. However, this is not the only catalyst boosting Bitcoin's price.

Bitcoin underperformed relative to other coins in 2020-2021. Now many of those coins have capitulated as regulatory pressure mounts. Concurrently, we are gaining clarity on regulations. The SEC is losing more cases, and the world (Hong Kong, UK, Singapore, UAE) is embracing crypto. The technology is much more mature, and the market has largely purged fraud. Some risks remain, but for now, Bitcoin's price seems free to rally until an ETF approval. I expect a significant Bitcoin correction once approved, with capital rotating into altcoins.

The macro environment is tricky as bonds and stocks collapse while gold, silver, and crypto rally. In my view, Bitcoin's underperformance this year has likely ended as capital rotates in. As Paul Tudor Jones and Larry Fink noted, Bitcoin can be a safe haven as bonds blow up. Current geopolitical tensions reinforce Bitcoin's perception as digital gold. It was created for this moment - decentralized and transactional during sanctions. No central bank holds Bitcoin to dump like bonds or gold. Bitcoin remains useful when inflation rages and bonds crater over massive government spending.

This chart below shows that a few months ago, Bitcoin became extremely oversold when it suddenly crashed. Based on some of my metrics, it was one of the most extreme crashes ever, given its magnitude and how the market was trading just days prior. Although Bitcoin is now overbought after repeatedly testing 30k, I expect it to rally higher soon. Being overbought does not necessarily mean the market will reverse imminently. Given previous rallies, this one appears to be just getting started.



Although it's true that Bitcoin's rally does not seem entirely 'healthy,' since it has left some gaps and double/triple bottoms below 29K, extending down to 19k. However, the market need not revisit these untested levels just because they exist. As we've seen in major bull runs and bear markets, the market can leave such levels unfilled for long periods, possibly indefinitely, especially with a major catalyst like an ETF on the horizon. One positive that some overlook while focused on these levels is that in perpetual swaps, the market did sweep the 24.9k low during the crash. Perpetual prices dropped much further than spot, meaning there may not be as much untapped liquidity below as some assume, since most action occurred in derivatives.




USDT currently has a small but significant premium over the dollar. This demonstrates demand for cash and too much cash on the sidelines. The stablecoin supply seems to have bottomed, as it has held above 123B for months now, while showing signs of recovery as more cash enters the market. Meanwhile, funding on perpetual swaps remains quite negative and open interest is relatively high, indicating potential for a significant short squeeze.



Grayscale has filled a major gap and retested key resistance, so the premium may not close as quickly as usual. It would be reasonable for someone to close out a long GBTC trade, since it has already rallied 90% relative to BTC after the discount hit -50%. Technically GBTC still looks very bullish, as does Bitcoin, so buying GBTC instead of BTC for an extra 10% gain seems decent for those willing to take on some extra risk. However, this carries some risk if the SEC further delays or rejects the ETF.





Ethereum also looks extremely bullish, as does ETHE. In my view, an Ethereum ETF will also eventually get approved, albeit potentially taking longer. ETHUSD seems to have filled a major inefficiency/FVG in perpetuals but not yet in spot. Currently, the market appears bottomed, despite having several key areas remaining to test lower, like some obvious double bottoms. ETHE looks very bullish now, poised for a major rally. Meanwhile, ETHBTC looks less great, seeming headed for 0.04 eventually, yet also finding support around current levels that could spur a significant bounce.





Coinbase is also looking very strong. The company is thriving with a lot going for it. The chart shows textbook accumulation. I also believe Coinbase will prevail against the SEC, making it 3-0 versus the SEC after Bitcoin, Ripple, and Coinbase wins. These victories would massively boost crypto overall.