Is Bitcoin ready for a pre-halving rally?
Bitcoin started 2020 off in a great way, as the price of Bitcoin rallied with 37%, producing a significant monthly candle. On a fundamental note, BItcoin seems to be reacting to global economic threats. Examples are the recent tension between Iran and the United States, but also the coronavirus in China.
Bitcoin broke a 7-month downtrend
The price of Bitcoin broke through a 7-month earlier in January, which is marking a trend shift and potential upward momentum. Even more impressive is the beautiful retest of the $7,600 level. The price of Bitcoin bounced quite strong from this level, indicating that buyers are willing to step in at this price.
Total market capitalization is showing strength as well
A similar strength is shown through the total market capitalization of cryptocurrencies. The following chart is showing a similar breakout of the market capitalization, indicating that the downward pressure is over for the moment. Breakout of the downtrend led to a rally to the $250 billion resistance.
However, there’s a remarkable difference between the Bitcoin and the total market capitalization chart. Bitcoin is still hovering against a significant resistance (the level of $9,500), while the total market capitalization already broke above $245 billion. Does this indicate further strength for the market?
As the chart is showing, the green zone was crucial to hold. Why was it essential? This is based on the support levels in recent years. The total market capitalization held on this support during the summer of 2018, before a massive breakdown in November of 2018 occurred.
The other way around, the total market capitalization couldn’t break through this same level for some period in March of 2019. After this breakthrough, the big surge towards $14,000 starting.
What does that tell us? Well, the level wasn’t ‘backtested’ since then. Through this backtest and the bottom formation, the data tell us that we flipped that level from support to resistance, indicating that investors are interested in stepping into the market.
However, what can we expect from the markets in the coming period? A common rumor is going around that the halving was already priced in last year.
Bitcoin halving in 100 days
I don’t think these events are priced in 1.5 years before they occur. The last halving gives us the following chart as a reference.
What can we get from this chart and the recent halving? Many similarities are shown in the market nowadays. Yes, there are more variables in play with the current market (read; global economic threats + size of the market in general). However, markets tend to move the same due to human psychology.
The price of Bitcoin broke out of the bear market in 2016 through a parabolic move, similar to the push from $3,000 to $14,000 last year. This move was followed by a corrective period in which the price needed to find new support. In the chart, it shows that this period took around 200 days.
After that, a colossal breakout led to an 80% surge just weeks before the actual halving took place on the 9th of July in 2016.
What does that tell us? That an event like the halving can’t be priced in that fast. The actual effect of a halving will most likely be in fact after the actual event takes place. However, FOMO (fear of missing out) could occur before such an event.
It’s pretty likely to occur again. One of the barriers to take is the $10,000 level. This $10,000 level is a psychological level for many people and would potentially give the media a reason to discuss Bitcoin more.
The moment that Bitcoin gets more momentum in the media by such a breakthrough, people will read about the halving. All in all, creating a snowball effect that would push the price back up again.
Be reminded; such a FOMO rally is not warranted for further upwards momentum. It’s quite often leading to a case of ‘buy the rumor, sell the news’. Investors and traders tend to buy the rumor, anticipating further growth. However, when the actual event takes place (usually before), a selloff is what occurs.