Bitcoin (BTC) has had a stellar few months as bulls ignored a resurgent U.S. dollar and Treasury yields to push the leading cryptocurrency to its highest level since late 2021.
That's the message from 10X Research after examining past data and a technical analysis indicator called the Relative Strength Index (RSI). Let's discuss both in more detail.
The theory that Bitcoin, the leading cryptocurrency by market value, bottoms 12 to 16 months before the halving and experiences upward trends before and a year after the halving is now well known.
More importantly for traders, the previous three cycles centered around the halving saw prices increase by over 30% in the eight weeks leading up to the quadrennial event, reducing the pace of supply expansion by 50% . The halving, due on April 19th, will halve the reward per block from 6.5 BTC to 3.25 BTC.
“Bitcoin gains an average of 32% in the 60 days leading up to the halving,” Markus Thielen, founder of 10X Research, told CoinDesk.
At press time, Bitcoin was changing hands at around $52,000. A 32% rally from here, according to past data, means prices could trade near the record high of $69,000 on or before halving day.
“The closer we get to the Bitcoin halving, the higher the likelihood that Bitcoin will recover, as evidence from the last three halving cycles shows. This time will be no different as there is a strong perception in the crypto community that the halving is bullish.” “This perception is undoubtedly feeding into the TradeFi community, which is aggressively buying these Bitcoin ETFs ahead of the halving,” Thielen added.
Strong inflows into US-based spot exchange-traded funds (ETFs) indicate bullish sentiment among traditional investors. These regulated ETFs allow investors to get into cryptocurrency without the hassle of storing coins.
Developed by J. Welles Wilder, the RSI is a momentum indicator that measures the speed and change of price movements over a set period of time, usually 14 days, weeks or months. Values above 70 indicate strong upward momentum in prices.
A week ago, Bitcoin's 14-day RSI surpassed 80 for the first time since December. 12 of 14 of these previous RSI signals heralded accelerating uptrends, leading to an average increase of 54% over the following 60, according to 10X Research days.
“For reference, Bitcoin was trading at $48,294 when the last signal was triggered, and if history (average return +54% in 60 days) is any guide, then Bitcoin could rise to $74,600 based on this signal. Dollars are rising,” Thielen noted.
Past performance is no guarantee of future results, and macroeconomic factors can single-handedly determine trends.
However, the current macroeconomic picture appears to support increased risk appetite thanks to the US Running is the most stimulating Financial policy in years. Goldman Sachs raised its year-end forecast for the S&P 500 by 4% to 5,200, citing expectations of robust global economic growth and a weaker dollar.