“BREAKING: Crypto” is what the whole timeline is talking about right now, as I pen this article. You will probably be reading this early next week, and hopefully by then, the conditions should be better.
Where next?
Took a little help from Luke, our in-house charting wizard, to come up with the key levels to watch out for from the technical perspective:
- On the 3-day chart, $106k [the 1.618 fib extension of the breakout] is a key roadblock. It is crucial for BTC to keep floating above this level for an extended leg up
- In such a case, the next immediate upside target would be $120k [the 2 fib extension]
- The current funding rates depict that the market ain’t overheated. In fact, when compared to the run-ups in November '23 and earlier in February this year, this metric is quite tame
- In terms of what to expect going forward, Luke says,
“My base case is we get a local top and pullback/consolidation around the second week of January in the runup to Trump's inauguration on January 20”
- Giving a more zoomed-out perspective, he added,
“This looks great long-term though, and the Trump administration promises to be great for crypto regulation and general growth across the space. So I think on the whole 2025 will be another good year, although things will be more volatile the longer this bull run continues and the more overheated things get”
Mayer Multiple
- Expanding the horizon by delving into the Mayer Multiple [MM]
- First things first, the MM was created to compare Bitcoin’s price with its past movements — It's basically a multiple of the current Bitcoin price over the 200-day moving average
- Whenever Bitcoin has rallied, this metric’s reading has majorly reflected readings above 1.5
- The MM is currently flashing a reading of 1.34
- This indicates that the asset is ripe for accumulation
- In fact, per historic trends, the best long-term results have been attained by accumulating BTC around low MM readings
The bands
- Alongside, Bitcoin’s price has been engulfed in the bullish band [yellow] on the chart. The ceiling of this range, i.e. $114.7k would be the upside test level
- During past cycles, from yellow, BTC has made it to the bullish extension [red] and overbought [dark red]region almost every time
- So, per this model, Bitcoin is likely gearing up to continue marching forward post this hiccup phase
- That being said, it is important to note that these observations are made with respect to historical actions, and crypto trends are subjected to different trends during every bullish/bearish cycle
Market reset
- It’s interesting to note that Bitcoin now finds itself with the lowest average wallet returns [30-day MVRV] since the start of the bull rally on October 10
- Accordng to Santiment,
“With this metric averaging 0% over the history of Bitcoin trading [due to markets being a zero-sum game], consider every percentage point into the negatives as an indication that there is an 'opportunity' to buy while other positions are at a loss”
Macro correlation
- The latest FOMC meet was peak hawkishness from the Fed. Jerome triggered the kneejerk downfall and one after other, all assets started following suit
- TradFi hasn’t been holding up that strong at the minute. The S&P and Nasdaq both dumped pretty hard, but according to Luke, this is just “a short-term flush due to the market being offside and priced for one more 2025 rate cut than we are now due to get”
- Based on technicals, the S&P should also likely bounce to the upside here. Every time the RSI has bottomed, we’ve seen a turnaround
- Another interesting trend to note: Since Trump has won the elections, BTC [pink] has rallied harder than the S&P. But viewed from the macro lens, it has mostly just caught up after performing relatively worse before
- As chalked out in the chart below, Q3 was quite bearish. The market was characterized by sell pressure. That was the time when we de-correlated from the S&P there. But now, we’ve caught up and will likely see both the markets move in tandem
The dowiside risks
- Alongside comes the M2 global liquidity correlation. Right now, it is essential for BTC to break from this. According to Luke, “This is the strongest case for current PA turning into a multi-week correction”
- If you’re a bit clueless, then note that global liquidity, also known as M2, is a measure of the total amount of money in the global economy
- It includes cash, savings deposits, and other liquid assets — it's basically a proxy of the amount of money available for spending and investing
- Meanwhile, Joe Consorti, the Head of Growth at Theya and the Institutional Lead at The Bitcoin Layer chalked out a couple of possible outcomes on Twitter:
“Two scenarios: dislocate from global M2 thanks to BTC-native buy side, or continue following it into a deep mid-cycle correction”
- If the latter scenario transpires, then we could witness a pullback up to $80k. Luke exclaimed, “would be bad for alts as usual”
- If the dip continues further and we lose the $74k mark, BTC will officially step into the bearish territory [translucent green on the MM bands chart]
Bottom line
So yeah, that's pretty much it from our end. The directional bias will play out depending on which side of the order book dominates, and you can expect any of the scenarios we've discussed to unfold accordingly.
On a side note, don’t get too distracted by the charts. It’s the holiday season, shut down your gadgets and ring the merry bells. Happy holidays!
