According to technical analysts familiar with the Bitcoin-BTC market in the short term, it seems that the world’s top cryptocurrency by total market capitalization is about to breach its current levels upwards towards the important psychological resistance barrier at $30,000, and it may continue its bullish trend towards The next major resistance area is towards the next important resistance level in the $32,500-$33,000 range.
Looking at the trading candles on the four-hour price chart of the relevant BTC/USD/currency pair, it is clear that the ascending technical triangle pattern has formed, which often forms before a price breach to the upside.
Caution remains for the bulls (bulls), Bitcoin formed a similar pattern between February 16th and 21st, but failed to break higher (at that time in the short term), and instead its prices spent the next few weeks falling again. other.
It should be noted that traders kept their eyes open – filling their eyelids – in anticipation of the Federal Reserve’s monetary policy meeting today, Wednesday, which may constitute a major catalyst for further price hikes for Bitcoin-BTC during the coming period; The bank is expected to raise interest rates by an additional 25 basis points (0.25%) to reach the range of 4.75-5.0%, but the opportunity remains available to stop raising them amid fears of cracks in the US banking system.
In any case, some analysts argue that Bitcoin could still benefit from the situation, whatever the outcome of this meeting (if the Fed decides to lean towards either the easing or the hawkish side).
On the one hand, the Federal Reserve’s decision to proceed with its tightening fiscal policies could lead to an exacerbation of the banking crisis, which will increase the attractiveness of Bitcoin as a safe haven (which was the main driver behind the rise in the price of Bitcoin in recent weeks. However, on the other hand, The Federal Reserve’s decision, if it comes to start adopting a fiscal easing approach, could lead to an improvement in overall financial conditions (and thus a tendency for more investors to invest in risk asset class markets), which could also boost the value of Bitcoin (and cryptocurrency markets in general). .
Although a large segment of the bulls (bulls) feel confident about their expectations that Bitcoin prices will continue to rise in the near term, it may be wise to temper these expectations, which carry only a few gains in the short term, given the indication of a number of One measure is that the Bitcoin market could be too hot right now.
The Bitcoin (BTC) market is on a hot tin
Following the recent bounce from previous monthly lows under $20,000 to current levels over $28,000, the 14-day relative strength index (RSI) for Bitcoin jumped from oversold to overbought territory (above 70). ), as the Bitcoin RSI has recently recorded around 71.5.
Here it should be noted that this does not necessarily mean that the market cannot continue to rise; On January 10, the relative strength index (RSI) for bitcoin entered the overbought zone, but prices continued to rise from the $17,000 level to nearly $23,000 at the end of the month.
On the other hand, the Bitcoin currency is trading at historically important levels above many of the main moving average indicators for the currency of Bitcoin, as the price of the BTC/USD currency pair rose by about 18% above the exponential moving average index measured in a time range of 21 days (DMA). -21), and its price increased by 19% above its counterpart measured in the 50-day range (DMA-50), by 32% above its counterpart measured in the 100-day range (DMA-100), and finally by 40% above its counterpart measured in the range of 200 days (DMA-200).
It is worth noting that this is the highest level the cryptocurrency has reached above the 100- and 200-day moving average indicators since late 2021, when Bitcoin reached an all-time high. At the same time, this level is close to the highest level that the price of Bitcoin has reached above the moving average indicators in 21 and 50 days at the same time.
On the other hand, an alternative way of looking at the current momentum of the Bitcoin market and assessing whether the cryptocurrency’s prices are increasing too fast is to look at the Z criterion (a metric that measures how far an asset’s current price has diverged from its fair -true) value. either way) compared to the average movement measured over a 200-day time range, which means the number of degrees of standard deviation of Bitcoin (at its current price) above its average prices over the last 200 days.
It is noteworthy that the Z-standard has crossed the third degree compared to the 200-day moving average, which means that the current levels above $28,000 indicate that the BTC/USD currency pair has more than 3 standard deviations above its average prices over the last 200 days.
This event is rare in the history of Bitcoin, and usually only occurs during the height of bull market rally. Recent history indicates that the Z benchmark above 3 does not necessarily mean an imminent market correction; In late 2020 through early 2021, the above-mentioned Z benchmark for bitcoin was stable above level 3 for an extended period during which the major cryptocurrency’s prices continued to make huge gains before the uptrend finally started to slow.
Bitcoin trades at higher levels than various “fair value” measures
An alternative way to assess whether Bitcoin is overvalued is to look at the level at which Bitcoin is currently trading against various estimates of the digital currency’s “fair value” based on its historical relationship to the traditional asset classes to which it is associated.
The graph below represents Bitcoin trading levels above or below fair value estimates according to the digital currency’s historical relationship to the S&P 500 stock index and the US Dollar Index (DXY) as well as the two-year returns on investments and the US 10-year returns over the past 60 years. days, and the fair value is calculated by analyzing the correlation between these different values.
It is indicated here that Bitcoin is currently trading at prices that exceed its fair value by approximately 30% for each of these assets and near its highest level since early 2021, and therefore describing the Bitcoin market currently as being on a hot plate is the least that can be said to express the current situation. .
Could the bitcoin market heat continue in the coming days?
Many measures and indicators indicate that things are getting hotter now, and history confirms that they may reach a higher degree. The relative strength index (RSI) has seen similar gains for longer and more sustained periods, as in the past bitcoin traded above major moving averages for extended periods during bull market periods.
Bitcoin’s Z measure as measured by the 200-day moving average has remained above current levels for longer periods, and Bitcoin’s price has remained above various measures of its short-term fair value.
At the same time, as we have mentioned in recent articles, the many metrics and indicators on the blockchain related to network activity, as well as the balance of the number of Bitcoins denominated in USD among wallets, in addition to the profits of the Bitcoin market, clearly indicate that we are witnessing a new bull market.
And if we are indeed facing a new global financial crisis and central banks like the Federal Reserve are forced to start cutting interest rates again – meaning a return to quantitative easing – then the Bitcoin bull market could head into a phase of hyperactivity represented by exponential price hikes.