Bitcoin Stirs as Breakout Nears

By Bruce Ng

Ever since Bitcoin (BTC, “A”) touched its most recent all-time high back in March, it’s been in a long, slow slide down.

As you can see below, prices rolled over into a descending channel. One characterized by a series of very choppy lower lows and lower highs.

Bitcoin Daily Prices

Figure 1. The left histogram illustrates prices at which most trading occurs. The greater the volume, the longer the horizontal bar, and the more likely the price it corresponds to will emerge as significant resistance or support. Click here to see full-sized image.

However, Bitcoin saw a spirited rebound in August. After falling to roughly $50,000 on headline-driven sentiment, BTC bounced back to finish the month just under $60,000.

September has for the most part continued this upside trend.

Now, investors’ eyes are eagerly focused on October. Or, as it’s known among crypto circles, Uptober. That’s because historically, October is a bullish month for the broad market.

Does that mean we can expect the next bull rally will start within the next 31 days?

Not quite.

There are two key reasons why Bitcoin isn’t ready to run just yet.

First, there is strong overhead resistance working against Bitcoin between $67,000 — $68,000. It’ll need strong momentum and a hot catalyst to push through.

And if Bitcoin stalls at its current price around $63,500, then a temporary retreat back to, say, the low $60,000s, should come as no surprise.

Second, Weiss’ crypto cycles expert Juan Villaverde has already said that he expects a long-term cycle low to hit after Uptober ends.

Specifically, his Crypto Timing Model is showing that low should hit sometime around Nov. 5.

This leads me to believe that October may not bring the next big bull rally. Instead, it could bring the end of the this long, choppy consolidation we’ve been stuck with since spring.

And if Bitcoin does retrace to the low $60,000 range and establish strong support there, it’ll clear the runway for when the markets really take off.

This outlook may feel a bit too optimistic. But there are several macroeconomic factors lining up that should support it.

In fact, there are three key reasons such hopes are unlikely to be disappointed.

1. Global liquidity is on the brink of significant expansion. The Fed just cut overnight interest rates a half-percentage point.

   Then the Bank of China also slashed mortgage rates and reserve requirements a half-percentage point. This means greater global liquidity, which is very bullish for risk-on assets.

2. The end of the U.S. election uncertainty is near. When the votes are in on Nov. 5, the whole world will know who the next president is. Also, the last time U.S. elections occurred in a BTC halving year (2020), crypto rallied explosively. We expect something similar to happen this time …
    
3. The fourth quarter of a BTC halving year tends to be incredibly bullish. As it was in the fourth quarter of the previous halving.

If I had to pick a likely launch date for crypto’s next significant move up, it would probably be Oct. 4, the date of the next U.S. Non-Farm Payrolls report.

Keep in mind, this will likely only have a near-term impact on the market.

But, as I have said before, savvy investors should take note of which sectors and projects outperform on a bounce. These have strength behind them and warrant a closer look.

Indeed, certain altcoins — cryptos other than Bitcoin — have already established their correction lows and are rallying upward.

Figure 2. OTHERS/USD. This is the combined market cap of all crypto less the top 10. Think of it as a crypto index for altcoins. Click here to see full-sized image.

The left histogram above illustrates prices at which most trading occurs. Notice strong support near $180 billion (the orange horizontal line). This level was repeatedly retested, but always held — even when Bitcoin dumped quite a lot.

Last month, the Altcoin OTHERS Index — which tracks all crypto besides the top 10 by market cap — broke decisively through overhead resistance near $196 billion.

In short, the alts are looking good and strong projects may just need a small push to rally.

Longer term, crypto markets are not likely to get back to full bullish mode before BTC breaks above its all-time-high near $72,000, retests that level and then pushes upward from there.

We may have to wait a little longer for that. Which is why I recommend using the time you have now to make sure your portfolio is ready for the ride.

To that end, keep an eye on your inbox in the coming weeks. Juan is working on a report you’re going to want to see.

I’ll give you more updates when I have them.

Best,

Dr. Bruce Ng