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 drop is possible, the overall increase appears to be continuing, with prices revisiting and potentially exceeding the record high of $69,000 before the fourth mining reward halving on April 19.
That’s the message from 10X Research after reviewing historical data and a technical analysis indicator known as the relative strength index (RSI). Let’s go over both in more detail.
The hypothesis that bitcoin, the leading cryptocurrency by market value, bottoms out 12–16 months before halving and then rises a year later is well known.
More critically for traders, the previous three cycles centred on the halving demonstrate that prices increased by more than 30% in the eight weeks preceding the quadrennial event, which cut the rate of supply expansion by 50%. The April 19 halving will reduce 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 had changed hands near $52,000. A 32% rally from here, following 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’s 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 have the power to independently create 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.
