Bitcoin: Every pullback is a buying opportunity
In recent weeks, banks have imploded and fears of a 2008-style crisis have come into play. Of course, politicians have rushed to the rescue with massive amounts of fiat money, while bond markets have already priced in a pivot away from restrictive monetary policy.
But as global markets slowly try to recover from the shock of recent US bank collapses and a government-backed bailout of Credit Suisse in Europe, Bitcoin has come out on top! It could be Bitcoin’s “watershed moment” thanks to the banking crisis as the biggest cryptocurrency enjoys its best quarter in 2 years amid financial turbulence.
Review/t2
We identified the $30,000 threshold as Bitcoin’s next price target about a month ago. With a recent high of $28,936, progress has been made towards this round psychological number. However, the road taken to get there was quite turbulent and far from straightforward.
Source: Tradingview
Initially, Bitcoin hit an eight-month high of $25,234 on February 16. Prices gradually pulled south after three failed attempts to surpass the $25,000 resistance. Due to the sudden bank run in the US, the correction quickly intensified, causing Bitcoin to plunge three floors lower, with the lowest point reached at $19,569.
As the extent of the bailout to stabilize the banking crisis resulting from the failure of Silicon Valley Bank became clear on Sunday evening, March 12, Bitcoin quickly rose to $22,000. This led to an immediate V-shaped trend reversal in the market, resulting in a gain of almost $10,000 (more than +47%) within just ten days. Finally, on March 28, Bitcoin reached its highest level since June 11, 2023, at $28,936.
In conclusion, Bitcoin once again underlined its volatile nature with such erratic price behavior. Nonetheless, it also impressively reaffirmed its status as a haven in the face of unfettered money growth in a very challenging market environment, outperforming 98% of all companies in the comprehensive S&P 500 index in March.
Bitcoin Technical analysis/t2
Bitcoin Weekly Chart – Strong resistance zone between USD 28,500 and USD 31,500
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Over the past four months, Bitcoin has made a remarkable recovery (+89.81%) from a low of $15,479 on November 21st to a recent high of $28,936. While the early weeks of the rally in December were shrouded in uncertainty, two significant green weekly candles in the first half of January provided greater clarity. However, February was a period of consolidation, with prices heading north again in March.
During this fulminant recovery, the 23.60% retracement ($28,109) was already surpassed. Retracement of 38.2% ($35,924) is also likely to be reached. On the journey there, the $30,000 round figure within the broad resistance zone between $28,500 and $31,500 could present challenges. Actually, it is quite unlikely that this robust resistance zone will be overcome directly. Instead, Bitcoin may require several attempts before it gains the necessary momentum to move towards USD 35,000 and beyond.
Overall, and despite its overbought stochastic oscillator, the weekly chart remains bullish. The next price targets are USD 30,000 and USD 35,000. However, in the circumstances, a more extensive correction may be necessary to achieve these objectives. Alternatively, if the current rally follows the roadmap established in 2019, an outright march towards USD 50,000 by early June could be feasible.
Bitcoin Daily Chart – 200-day moving average has held
Bitcoin had already rallied towards $25,234 on its daily chart before the new banking crisis forced it back. This pullback bottomed right at the 200-day moving average ($20,253) and Bitcoin prices turned sharply higher from there. Currently, this initial support (+50.14%) is consolidating at high levels, with prices holding above the initial support of $26,500.
While a minor correction below $25,000 could be beneficial, many have missed the significant rally and are anxiously waiting to buy in. As a result, the “fear of missing out” has returned to the market. Given the sharp V-shaped trend reversal, it is therefore unlikely that Bitcoin will make the laggards for many more services. Thus, the “fear of not missing out” returns to the market.
In summary, the daily chart is bullish and suggests a rally to around $30,000 soon. On the downside, ideally the new support around $25,000 should already withstand possible attacks from the bears. A pullback towards $23,000 would be even more of a buying opportunity. Only a drop below USD 20,000 ends our bullish recovery scenario.
Bitcoin sentiment/t2
The sentiment in the crypto sector has continued to brighten over the past four weeks. With a score of 64 out of 100, the Crypto Fear and Greed Index is thus slowly but surely approaching the overly optimistic “greed state”.
Source: LookintoBitcoin
However, the sentiment index still has a lot of room for improvement. Only at levels above approx. 75 to 80 should the ongoing recovery run into problems. Therefore, the potential for surprise continues to be on the upside.
Overall, Bitcoin is far from euphoria and excessive optimism. At the same time, however, there is no contrarian purchase option either.
Bitcoins Seasonal variations /t2
The seasonal pattern adds to the ongoing rally in Bitcoin, potentially providing support into early to mid-June. However, after this time frame, seasonal statistics shift, and historically Bitcoin experiences significant downward pressure from mid-June to late fall.
Sound Money: Bitcoin vs. Gold/t2
Gold and Bitcoin have seen significant gains over the past two weeks. With today’s prices at just under $28,325 for one Bitcoin and $1,965 for one troy ounce of gold, you’d have to pay about 14.4 ounces of gold for one Bitcoin. Put another way, a troy ounce of gold currently costs around 0.069 Bitcoin.
Despite the sharp increase in the price of gold and the short-lived but sharp decline in Bitcoin, since the beginning of the year, Bitcoin has clearly been the fastest horse. In fact, Bitcoin has outperformed gold by up to 61.85% since January 1st. While gold’s conservative nature provides a stable anchor in a risk-off environment, such as in 2022, Bitcoin is much better suited for a risk-on mode. In an ever-changing market environment, Bitcoin and gold combine best.
Bitcoin Surpasses Gold (Again)
From a technical standpoint, the Bitcoin/Gold ratio continues to favor Bitcoin’s outperformance over gold. The year-to-date recovery has yet to reach the minimum target (23.6% retracement) of 15.65. A “small” standard recovery should at least bring the ratio back to the 38.2% retracement (19.81). However, the increasingly overbought weekly stochastic is sending a warning signal.
In summary, the Bitcoin/gold ratio has clearly been improving since the beginning of the year. Nevertheless, there will still be room to reach the minimum recovery target in the area of 15.50 to 16.
Macro update/t2
Over the past 12 months, we have repeatedly warned that the US Federal Reserve’s brutal interest rate hikes would cause damage. Now, in a very short time, three American financial institutions have collapsed, and a huge catastrophe threatens the global financial system. The responsible parties are the hasty interest rate increases, which push the over-leveraged banking system and thus the entire global economy to the brink.
The end of restrictive monetary policy in sight/t2
Source: Holger Zschaepitz
Of course, governments and central banks responded with unprecedented bailouts, increasing the Fed’s balance sheet by over $300 billion and likely marking the end of their restrictive monetary policy. However, failure to cut interest rates could further damage the banking system and the economy, potentially leading to riots, anarchy and revolution.
Ultimately, expect an increase in money printing as a short-term solution, leading to a return of loose monetary policy and high inflation in the coming years, possibly even sooner. The fight against inflation is lost.
Lifebelt against money printing/t2
This means that precious metals, Bitcoin and cash are more important than ever to investors. While you can probably escape expropriation in the event of bankruptcy with quality stocks (special assets), your wealth will only be outside the collapsing financial system if it is held in gold, silver and Bitcoin. And while banking stocks collapsed, Bitcoin rose sharply. Should galloping inflation or even hyperinflation occur, Bitcoin will be the fastest horse.
Conclusion/t2
For the past three weeks, events have come thick and fast. Although the central bankers and politicians in charge are still squirming, the “interest rate hike and balance sheet reduction” experiment has clearly failed. One can only hope that things will calm down a bit in the short term and that this will buy investors some time. In any case, the uncertainty is enormous, and the implosion can now also unfold very quickly. Alternatively, and much more likely, inflation will accelerate dramatically.
Ideally, Bitcoin will provide another buying opportunity with a short-term pullback in the $23,000-$25,000 range. It would be another chance to transfer wealth into the digital gold called Bitcoin and thus bring your hard earned fiat money to safety.
Regardless, our recovery scenario outlined in December remains intact. Considering the dramatic situation in the financial system, we would not be surprised if Bitcoin were to scratch the 50,000 USD mark in just a few months.
Written by:
Florian Grummes
