Bitcoin (BTC) has had a stellar few months, with bulls ignoring a resurgent U.S. dollar and Treasury yields to push the leading cryptocurrency to the highest level since late 2021.
While a price pullback looks plausible, the broader uptrend looks set to continue, with prices revisiting and potentially surpassing the record high of $69,000 before Bitcoin Blockchain’s fourth mining reward halving due on April 19.
That’s the message from 10X Research after studying past data and a technical analysis indicator called the relative strength index (RSI). Let’s discuss both in more detail.
Pre-halving bullishness
The theory that bitcoin, the leading cryptocurrency by market value, bottoms out 12-16 months ahead of halving and chalks out uptrends ahead of and a year after the halving is well known by now.
More importantly for traders, the previous three cycles centered around the halving show prices surged by over 30% in eight weeks leading up to the quadrennial event, which reduces the pace of supply expansion by 50%. The halving due on April 19 will halve the per-block reward to 3.125 BTC from 6.25 BTC.
“Bitcoin rallies an average of 32% in 60 days ahead of the halving,” Markus Thielen, founder of 10X Research, told CoinDesk.
At press time, bitcoin changed hands near $52,000. A 32% rally from here, in accordance with the past data, means prices could trade close to the record high of $69,000 on or before the halving day.
“The closer we reach the Bitcoin halving, the higher the probability that bitcoin will rally, as the evidence from the last three halving cycles shows. This time will be no different as the perception within the crypto community is high that the halving is bullish. This perception is undoubtedly flowing into the TradeFi community, which is aggressively buying these Bitcoin ETFs ahead of the halving,” Thielen added.
Strong inflows into the U.S.-based spot exchange-traded funds (ETFs) suggest a bullish mood among traditional investors. These regulated ETFs allow investors to take exposure to the cryptocurrency, bypassing the hassle of storing coins.
Monthly RSI points north
RSI, developed by J. Welles Wilder, is a momentum indicator that measures the speed and change of price movements over a set period, usually 14 days, weeks, or months. Readings above 70 indicate a strong upward momentum in prices.
A week ago, bitcoin 14-day RSI crossed above 80 for the first time since December. 12 out of 14 such previous RSI signals presaged accelerated uptrends, producing an average gain of 54% in the following 60 days, according to 10X Research.
“As a reference, Bitcoin traded at $48,294 when the last signal was triggered, and if history (avg. return +54% in 60 days) is any guide, then bitcoin could rally to $74,600 based on this signal,” Thielen noted.
Past performance does not guarantee future results, and macroeconomic factors could single-handedly make or break trends.
That said, the present macro picture looks supportive of increased risk-taking, thanks to the U.S. running the most stimulative fiscal policy in years. Goldman Sachs has raised its year-end forecast for the S&P 500 by 4% to 5,200, citing expectations for robust global economic growth and a weaker dollar.