Bitcoin is down 15% from its 2023 highs, but $40,000 may be closer than you think due to several important factors.
MARKET ANALYSIS
Bitcoin has dropped nearly 15% from its yearly high of around $31,000, with the recent regulatory crackdowns on crypto exchanges Coinbase and Binance and the Federal Reserve’s hawkish forward guidance accelerating its sell-off.
is up 60% year-to-date, holding above a technical support level of $25,000. Moreover, there are a few reasons a new bull cycle could begin.
Bitcoin halving
The next Bitcoin halving, a preprogrammed event that slashes the cryptocurrency’s supply rate by half every four years, is coming up in April 2024.
The previous three Bitcoin halvings (in 2012, 2016 and 2020) have all preceded massive BTC price rallies and new all-time highs. For instance, BTC is up 276% since the previous halving in May 2020.
The market will likely be in an accumulation zone until the halving, according to analyst Lark Davis, who anticipates Bitcoin to test its record high of $69,000 in the next 18 to 24 months. One analyst even sees the price hitting $160,000 by April 2024
Related: Why Cathie Wood is bullish on Coinbase stock and believes Bitcoin will reach $1 million
BlackRock Bitcoin ETF
BlackRock’s application with the United States Securities and Exchange Commission for a Bitcoin exchange-traded fund (ETF) has also boosted confidence in a potential BTC price rally in the days leading up to the halving.
The investment firm, which manages $8.5 trillion in assets, has a near-perfect ETF approval record with the SEC. The SEC’s deadline to respond to BlackRock’s application is around March 2024, a month before the halving.
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An SEC approval could double Bitcoin’s bullish prospects after the halving, several analysts argue.
“Your are watching game theory at work,” analyst Crypto Tea stated, noting:
“BlackRock understands the bitcoin halving is less than a year away. New supply will decrease while demand continues to increase from worldwide hyperinflation. They are asset managers and need to capture Bitcoin’s performance before their competitors do.”
Bitcoin dominance rising
The latest SEC crackdown on Binance and Coinbase has left many top altcoins under stress, particularly those deemed “unregistered securities.” That has coincided with the Bitcoin’s crypto market dominance crossing 50% for the first time in two years.
In other words, capital is moving from altcoins to Bitcoin, as the latter is not considered a security by the SEC. Therefore, BTC may be seen as the “safe” bet when compared with the 60-plus cryptocurrencies deemed securities by the regulator.
MicroStrategy co-founder Michael Saylor has predicted this will push BTC’s market cap to 80% of the total crypto market in the coming years. He said:
“Regulatory clarity is going to drive Bitcoin adoption by eliminating the confusion & anxiety that has been holding back institutional investors. Bitcoin dominance will continue to grow as the #Crypto industry rationalizes around $BTC and goes mainstream.”
BTC price “bull flag”
Technicals show Bitcoin painting a clear bull flag pattern on its longer-timeframe charts, suggesting an upside continuation of its overall recovery rally.
A bull flag gets resolved after the price breaks above its upper trendline and rises by as much as the height of the previous uptrend. As a result, Bitcoin’s bull flag target comes near $35,500 — a level that served as strong support in May 2021 and May 2022.
Still, Bitcoin will need to close decisively above $35,500 to begin a bull cycle, given that it would still be a lower high compared with the cryptocurrency’s previous bear market peaks.
Interestingly — and simultaneously to the bull flag pattern — BTC price could be on the cusp of a breakout in its prevailing inverse-head-and-shoulders (IH&S) pattern, as shown below.
An IH&S is a bullish reversal pattern, confirmed by the formation of three troughs under a common neckline resistance. The middle trough comes to be deeper than the other two, which have more or less the same height.
As a rule, an IH&S pattern is resolved after the price breaks above the neckline and rises by as much as the distance between the middle trough’s lowest point and the neckline. Sometimes, the price returns to retest the neckline as support after the first breakout attempt.
Related: 31% of young Aussies hold crypto despite being ‘risk averse’ — ASX survey
Thus, a rebound from the IH&S neckline could have BTC price rally toward $40,500, up more than 60% from current price levels and confirming a new bull cycle.
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