Looking According to Technical Analysts Bitcoin Markets on the short-term horizon, the world’s largest cryptocurrency by market capitalization looks like it could be on the verge of a breakout towards the psychologically important $30,000 level and perhaps the next major resistance zone around $32,500-$33,000 Is.
look at B T c/USD On the four-hour candlesticks, there seems to be a bullish ascending triangle pattern forming. These technical patterns often form before bullish breakouts.
Although the bulls should be warned – Bitcoin made a similar pattern between 16th and 21scheduled tribe February’s high but failed to break (in the immediate future anyway), and instead spent the next few weeks trading lower again.
businessman looking ahead US Federal Reserve policy meeting on Wednesday As the next potential bullish catalyst.
The Bank is expected to raise interest rates by another 25 bps to a range of 4.75-5.0%, but there is a chance they could hold off amid concerns about cracks in the US banking system.
Analysts have argued that regardless of the outcome (i.e. aggressive or peaceful), Bitcoin There can be benefits.
On the one hand, a hawkish Fed could worsen the bank crisis and further increase the safe-haven appeal of bitcoin (this has been a significant headwind for bitcoin in recent weeks).
On the other hand, a dovish Fed could result in easing financial conditions, which could also boost bitcoin (and the broader crypto markets).
While many bulls are feeling confident in bitcoin’s near-term outlook, it may be wise to tone down expectations for further short-term gains, given that several metrics point to the bitcoin market becoming very hot. We do.
The bitcoin market is very hot right now
Bitcoin’s 14-day Relative Strength Index (RSI) score moved from oversold territory to overbought territory (defined as above 70) in light of the recent surge from prior monthly lows below $20,000 to current levels above $28,000. has jumped.
The RSI for bitcoin was last seen around 71.5.
This does not mean that the market cannot continue to go up. on january 10thBitcoin’s RSI was pushed into overbought territory, but the price moved from $17,500 to nearly $23,000 by the end of the month anyway.
Elsewhere, bitcoin is trading at historically important levels against several of its major moving averages. BTC/USD was almost 18% above its 21-day moving average (DMA), 19% above its 50 DMA, 32.5% above its 50 DMA, and 40% above its 200 DMA.
The cryptocurrency has been trading higher against its 100 and 200DMA since late 2021, right when bitcoin was reaching all-time highs. Meanwhile, this is the most bitcoin has been close to this year since the 21 and 50 DMAs.
An alternative way to look at bitcoin market momentum and assess whether the cryptocurrency is getting too overbought is to look at its Z-score at its 200DMA.
This is essentially how many standard deviations Bitcoin (at its current price) has from its mean price over the past 200 days.
Bitcoin’s Z-score for its 200DMA recently crossed 3, meaning that at the current level above $28,000, BTC/USD is more than 3 standard deviations from its mean price over the past 200 days.
This is a rare occurrence in bitcoin’s history and usually only occurs during aggressive bull markets.
Recent history shows that a Z-score rising above 3 does not mean an imminent recovery is coming.
In late 2020/early 2021, bitcoin’s Z-score was above 3 for a long period during which BTC price continued to experience a bullish run, before the rally eventually calmed down.
Bitcoin Trading Above Various “Fair-Value” Metrics
Another alternative way to assess whether the bitcoin rally is getting too hot is to look at how the current bitcoin price is trading with different estimates of the cryptocurrency’s “fair value” based on its historical correlation with traditional asset classes. with whom it is related.
The graph below shows how far above or below bitcoin is trading relative to its fair value over the past 60 days given the historical correlation to the S&P 500, DXY, US 2-Year Yield and US 10-Year Yield. Have an estimate. Fair value is calculated using regression analysis.
Bitcoin is currently trading around 30% above its fair value for each of these assets, nearing their highest levels since early 2021. At the very least, it suggests that we have a very hot bitcoin market on our hands.
Could the Bitcoin Market Be Overheated?
While various metrics suggest that things are indeed heating up, history says that things may still be getting much hotter.
The RSI has been higher for a longer and more sustained period of time.
Bitcoin has traded at more extended levels versus key moving averages for a sustained period of time during the bull market.
Bitcoin’s Z-score has remained above current levels for longer periods of time, even for its 200DMA, which is simply a different measure of bitcoin’s price versus its short-term fair value.
Meanwhile, as discussed in improvised articlesRelated to various on-chain metrics network activityThe balance of USD-denominated bitcoin money between wallets and bitcoin market profitability and all screaming bull signs.
if we are really facing a new global financial crisis And central banks like the Fed have been forced to start cutting interest rates again.return to quantitative easingThe bitcoin bull market may yet go into overdrive.