Bitcoin bulls are excited about Fundstrat’s prediction for $180,000 bitcoin before the April 2024 halving. To put that in perspective, that would be a 500% plus move from current prices in less than 12 months if the prediction comes true. The reason? Supply and demand.
Currently, bitcoin’s daily demand is $25 million and is just about equivalent to daily mining rewards of about $25 million. If a bitcoin ETF comes out, this would add an extra $100 million in incremental daily demand. This increase in demand, with the April 2024 halving set to slash daily mining rewards to $12 million, would mean the price of bitcoin would have to rise significantly to meet the new equilibrium among buyers and sellers.
“This [bitcoin ETF launch] would bring daily demand to $125 million, while daily supply is only $25 million. The implied equilibrium price would need to rise so daily supply matches daily demand. Equilibrium analysis suggests that a clearing price is $140,000 to $180,000, before the April 2024 halvening,” Fundstrat said.
And the big talk in crypto land is the potential release of a BlackRock bitcoin ETF. If the SEC approves, this ETF could lead to the largest ETF launch ever breaking record holder QQQ, and would boost daily demand for bitcoin. This would attract new investors into bitcoin including large institutions and funds.
This ETF is the major fundamental news which is driving the price action on the cryptocurrency. But crypto bulls would say this is the medium/long term catalyst.
From a technical perspective, bitcoin has a bit of a hiccup on the road to $180,000. A critical support zone has broken just a day before the Federal Reserve Interest Rate decision where the Fed is expected to raise interest rates by 25 basis points. The Fed meeting will be of importance to bitcoin traders and investors as the US dollar will be affected. Since BTC and the USD trade inversely to one another, the Fed meeting could impact BTC depending on the USD price action. But it is worth noting that as of late, the move in the USD has had less of an impact and influence on BTC.
Let’s start with the larger time frame.
Above is the weekly chart of bitcoin. Back in March 2023, I told readers that bitcoin confirmed a major break through and trend reversal with a weekly candle close above the $25,000 resistance zone. Price rose to the $31,500 zone before selling off. It was not a surprise since this was a key resistance zone, hence a price target for longs.
Bitcoin pulled back all the way to the $25,000 zone which again, was not surprising for swing traders. Breakouts tend to see the price pullback to retest the zone before continuing higher. Bitcoin did this during the week of June 12th 2023 which solidifies the new trend shift.
From a market structure perspective, the breakout above $25,000 led to the beginning of a new trend. Bitcoin has completed a downtrend, has ranged for a few months, and the break above $25,000 initiated a new uptrend. The retest of $25,000 confirmed a higher low which is the skeleton component of an uptrend.
So for those aiming for higher bitcoin prices, the good news is that the technicals are pointing to higher prices. But I cannot say anything about targeting $180,000 based on the charts alone.
But as we know, prices do not move up forever in an uptrend market. There are corrections. And Bitcoin may have just confirmed one in play.
On the daily chart, bitcoin confirmed the breakout above a flag pattern. Bullish. Very bullish. And you can see the breakout saw momentum continue with large green 5% plus daily candles taking us back to the $31,500 resistance zone which bitcoin rejected back in April 2023.
The crypto market gained momentum on the XRP SEC news. That news did not really impact bitcoin as much as it did with other alt coins. However, either way you look at it, the momentum from that XRP SEC news has faded away.
Bitcoin attempted to breakout above the $31,500 zone with a nice green candle printed on July 13th 2023. But that momentum was killed the following day with a red engulfing candle, a quintessential rejection and bearish single candlestick pattern, ESPECIALLY when printed at a resistance zone.
Bitcoin ranged here indicating more exhaustion of buying pressure. The pattern looks like a head and shoulders reversal pattern. Bitcoin has now confirmed a breakdown of this pattern by closing below the $30,000 zone.
For bitcoin to reject this breakdown, we would need a close back above the $30,000 zone. This would confirm a false breakdown or a fakeout and would lead to another attempt to take out $31,500.
But a retest of $30,000 is likely to see more sellers jump in leading to a rejection and move lower to the $27,500 support zone. This is just following traditional breakdown and breakout price action. When bitcoin hits $27,500 this is where I would look for evidence that this correction phase is over, and bitcoin continues its uptrend.
In summary, a major breakdown just a day before the Fed meeting. If the dollar drops hard on a dovish Fed, then this could see bitcoin retake $30,000 confirming a false breakdown. However, bitcoin has not reacted much to the recent USD price action. A failure to close above resistance at $31,500 points to more downside in a corrective phase.