Bitcoin bulls are anticipating a surge in the market, with the potential to test the crucial $40,000 level. This optimism is fueled by the recent formation of an ascending triangle, a bullish short-term technical pattern. Currently, the BTC price hovers in the $37,600s, experiencing some intra-day volatility due to reports of a multi-billion-dollar settlement between the US Department of Justice and Binance to resolve a criminal investigation into the crypto exchange.
Despite these fluctuations, the macro trading environment serves as a clear tailwind for cryptocurrencies. The rise in US stocks, coupled with falling US government bond yields and a declining US dollar, indicates a market sentiment that the Federal Reserve will cut interest rates next year. In addition, there is ongoing optimism regarding near-term spot Bitcoin ETF approvals. Consequently, the BTC price risks appear to be strongly tilted towards the upside in the coming days and weeks.
The Ascending Triangle Formation
Bitcoin’s ascending triangle formation aligns with this short-term bullish view. The cryptocurrency has been supported by an uptrend since late October, finding significant support at its 21-day moving average (21DMA) last week. However, the upside has been limited by resistance at the $38,000 level. Nevertheless, the repeated tests of this resistance level suggest that sellers, primarily investors taking profits from recent gains, may be nearing exhaustion. This sets the stage for another leg higher in the market.
Bitcoin’s 14-Day Relative Strength Index (RSI), which indicates market overbought or oversold conditions, recently moved back into neutral territory after signaling overbought conditions for several weeks. This suggests room for buying pressure to accumulate again. A breakthrough above $38,000 is likely to have strong momentum.
One potential signal that could hinder the short-term bullish narrative is the increase in BTC token inflows to exchanges in recent weeks, following Bitcoin’s rise above $35,000. This suggests a higher likelihood of profit-taking in the future. However, similar conditions were observed from February to May without significantly impeding Bitcoin’s upward trajectory.
The Path to New Heights
If Bitcoin manages to convincingly break above $38,000, the next logical target is a swift test of $40,000, a level not seen since April 2022. Once this psychologically important level is breached, there are no major technical obstacles until the 2022 highs at $48,200.
Considering the broader macroeconomic context, Bitcoin is poised to benefit from several factors. Assuming US economic data continues to signal a cooling economy and room for near-term rate cuts, combined with the imminent approval of spot Bitcoin ETFs and the halving of the Bitcoin inflation rate in April 2024, there are numerous bullish narratives supporting further near-term upside in the crypto market.
Furthermore, an analysis by Matrixport reveals that if Bitcoin is already up over 100% at this stage of the year, there is a 71% chance that the cryptocurrency will finish the year at even higher levels, with year-end rallies averaging around 65%. Matrixport’s head of research, Markus Thielen, emphasizes this upside potential, stating, “Based on these statistics, bitcoin continues to offer upside potential, and a +65% year-end rally would lift prices back to $56,000.”
