After Bitcoin (BTC) reached a yearly high of $19,501 on January 13, where does it go next?
Bitcoin is currently experiencing a resumption of bullish momentum after the positively perceived Consumer Price Index (CPI) report was followed by a strong rally in the crypto market.
Bitcoin’s recent rally is creating heightened volume levels and higher social engagement on whether the price is in a fakeout mode breakout.
Is the Bitcoin bear market over?
While the market is still technically in a bear market from last week, investor sentiment is improving. According to the Fear and Greed Index, a crypto-specific metric that gauges sentiment using five weighted sources, investor sentiment toward the market has hit a monthly high.
The price of Bitcoin is now approaching the psychologically important level of $20,000 and many analysts and traders are posting their thoughts on where the price of BTC might go.
Let’s explore some of these perspectives.
Bitcoin trading volumes remain a concern
The Bitcoin price has yet to recover from pre-FTX levels, but rose above $19,501 on Jan. 13 for the first time since Nov. 8, 2022. Despite the strength of the recent rally, some analysts believe the price of BTC must reach $21,000 before the current uptrend can be sustained.
According to Glassnode analysis,
“A renewed uptrend that began on January 1 has taken bitcoin to the $18.6-18.9k level, but a move to $19,000 is needed to claim a new trading channel around 19,000-21 $000 Resistance is expected around these levels as bitcoin faces a medium-term downtrend If price does not break above the trendline, we expect a move back towards the 16,000 area $ to $17,000.”
The lack of trading volume around $18,000 shows weakness in current on-chain and centralized exchange (CEX) activity. The most significant volumes and overall activity appear to be surrounding the $16,000 level, suggesting that this is a stronger floor than the current price range. With less volume surrounding levels above $20,000, Bitcoin’s rally may be capped at $20,000.
Is this just a bearish rally?
Bitcoin still faces headwinds including massive layoffs amid a tightening macro economy, legal issues related to Gemini and Genesis, and the potential creation of a US House crypto-focused subcommittee.
Additionally, Bitcoin’s Relative Strength Index (RSI) currently shows that BTC is overbought. According to the RSI analysis, a strong downtrend can form when the price corrects.
Macro markets are also at major resistance levels. The US Dollar Index (DXY) is at key support, meaning risky assets like Bitcoin could start to see selling if the index rallies. Bitcoin remains correlated to equities and the SPX mini futures index is also showing signs of pullback.
TraderSZ explains below:
$BTC – huge resistance here…dxy at key support…ES looks like it could pull back a bit, eth at macro midrange…has only been up all week so might get some profit taking/pullback …. the arrow would be my trigger IF it follows the plan pic.twitter.com/6JziAmBywH
—TraderSZ (@trader1sz) January 12, 2023
With Bitcoin investors taking profits as suggested by TraderSZ, it may be difficult for BTC to reach higher levels.
Historical Analysis Indicates New Bitcoin Bottom
Bitcoin is currently below its 200-week moving average and according to independent market analyst Rekt Capital, the price of bitcoin may have already hit its macroeconomic low based on historical data. Historically, the “Death Cross” level is showing a low of $23,500.
—Rekt Capital (@rektcapital) January 13, 2023
Although traders and technical analysts are not known to accurately predict the duration of a bull or bear market, independent market analyst HornHairs cited historical data from 2015 to estimate how long Bitcoin will take to reach a new all-time high.
The bull market from 2015 to 2017 lasted 1064 days, matching the bull market from 2018 to 2021 which lasted the same number of days. If traders match the bear market that followed between 2017 to 2018 and 2021 to the current market, it would take 1,001 days for Bitcoin to reach a new all-time high.
Bull market 2018-2021: 1064 days
2021-*current* market low: 364 days
Days left to peak if we just copy the cycle timeline again: 1001 days pic.twitter.com/KoNZxJRuy5
— HornHairs (@CryptoHornHairs) January 12, 2023
Despite the current conditions and the strength of the current price breakout, Bitcoin has proven many technical analysts wrong in the past. Risk-averse traders might consider keeping an eye on increasing trading volume at higher prices as an indicator of whether Bitcoin is finally back in a bull market.
The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.