Bitcoin price crosses $69,000
Bitcoin's strong price rally of the past few weeks reached a significant milestone on Tuesday, as the price briefly crossed the previous all-time high (ATH) of $69,000. However, after reaching just above the previous ATH, the price faced a significant resistance level and started to decline. The falling price in turn triggered a strong liquidation of leveraged positions, which further accelerated the price drop. The price of Bitcoin fell by more than 10 percent in a few hours, finally bottoming out at just under $60,000.
Quick liquidation drops often bounce back quickly, and within a few hours, the price returned to the $67,000 level, where it has been since Wednesday.
On longer time frames, the price development of bitcoin is still very strong. Bitcoin's price has increased by almost 60 percent in the last month, and by about 30 percent in the last two weeks. A major factor in this price rally has been the Bitcoin spot ETF funds that were launched in January, whose inflows have remained strong as the price has risen, with daily net inflows exceeding $500 million on several days.
Bitcoin already at ATH, what’s next?
Bitcoin's new ATH on Tuesday makes many investors wonder about what this market cycle is shaping up to be like, and at what phase of it we are in at the moment. At this stage, it is already clear that this cycle significantly differs from the previous ones in terms of timeframes. In previous cycles, the new ATH has only been reached about half a year after the Bitcoin halving. Now we are still 1.5 months before the halving, and the previous ATH has already been crossed.
If, as a thought experiment, we assume that despite the rapid progress of this cycle this far, the time from crossing the previous ATH to the final price peak would remain similar to previous cycles (around 10 months), this could mean that the final market top could already be seen around the end of the year 2024.
We can also consider the case, in which the ratio of the duration of the two main phases of the cycle (from bottom to the previous ATH and from the previous ATH to the final market top) would remain about the same. As a rough estimation, we could say that in the previous two cycles, it took an average of about 21 months from the bottom to the previous ATH. In this cycle, the same move has taken only 15 months. A similar ratio in the latter phase of the cycle could mean a price peak perhaps as early as September-October 2024.
The last scenario presented may not be the most likely, but we consider it a completely realistic option that crypto investors should be prepared for. A price peak in just over half a year would be quite a speedrun of the market cycle, and would probably also mean that if we see an actual "alt season" at all in this market cycle driven by bitcoin ETF funds, it would probably be very short and intense one.
In this scenario, one could find some somewhat surprising similarities to the "mid-halving rally" seen between the Bitcoin halvings of 2019, where the bitcoin price started to rise in the spring of 2019 just after the FED rate hikes ended, and reached its top in the summer as the rate cuts began.
The probability of the rate cuts not starting before September is still considered quite low, but in the last few weeks it has started to shift from a complete impossibility to a somewhat plausible scenario. If inflation remains sticky in the spring time, it is not impossible to think that interest rate cuts could not be seen until the fall, in which case they could coincide with our earliest estimate of the market top.
Finally, it must be pointed out that everything presented above is just speculation, the reliability of which should not be overestimated. In addition to the general difficulty predictability of the crypto market, only two full market cycles serve as a historical reference point, and the extrapolation of any predictions from such a small sample size is naturally somewhat dubious. However, it is already certain at this stage that the ongoing market cycle will clearly differ from its predecessors, and the crypto investors should stay alert and open to some surprising scenarios.
PCE index in line with expectations
The new PCE index, which indicates the price development of personal consumption in the United States in January was published last week. The index rose by 0.3% in the month and by 2.4% in the year, which corresponded quite well to expectations. Excluding the typically volatile food and energy categories (so-called Core PCE), the monthly increase was 0.4% per month and 2.8% annually.
Both total and core PCE remain well above the official US target of two percent annualized. On the other hand, Core PCE has been coming down systematically for almost 1.5 years, which indicates that inflation is still moving in right direction.
However, based on the expectations and the statements made aloud by the central bank's executives, the “last mile” oin the inflation level from three to two percentages may prove to be a difficult and time-consuming process. The market has already started to adjust to the possibility that the first rate cut might not even be seen in June. CME FedWatch gives a 35% probability of leaving the key interest rate unchanged in June, which just a month ago was estimated to be very unlikely.
Ethereum Dencun upgrade next week
The expected major upgrade of the world's largest smart contract protocol Ethereum, the so-called The Dencun upgrade will take place next Wednesday, March 13, 2024. It is the biggest update of the Ethereum protocol since last spring's Shapella upgrade, and in it nine Ethereum development proposals (Ethereum Improvement Proposal, EIP) will be implemented. The greatest interest is in EIP-4844, which enables the utilization of new "blob" data, which is expected to significantly reduce the transaction costs of layer-2 blockchains, which in turn is expected to open completely new use cases for the Ethereum blockchain.
Dencun upgrade has already been implemented in three testnets, and its successful implementation next week would be a significant milestone in the in the development of the Ethereum protocol.
The price of ether, the native token of the Ethereum protocol, has been on the strong rise since the update, rising by around 60% during last month. It would not be completely surprising if the implementation of the update would cause a short-term “sell the news” price drop, but in the longer term, the successful implementation of Dencu's upgrade is a clearly positive driver for ether in the ongoing bull market.
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