Bitcoin on solid footing, but the real news is below the surface

Bitcoin Technical Analysis

This week, Bitcoin broke out of the descending triangle that had defined its price action since late May. The top of the upper resistance trendline of this formation was tested on three separate occasions in the first week of June, in mid-August and in mid-September. In each of these attempts to test the upper resistance, the bearish faction showed its teeth. On all three occasions, Bitcoin quickly fell to the bottom of the triangle around $18,000, the first rejection back in the second quarter of 2022 resulting in Bitcoin falling to its lowest price in 2 ½ years.

But while this bullish burst was welcomed by BTC bulls, it in no way suggests that Bitcoin is off to the races. The truth is that volatility in the market has reached a record low according to the historical volatility index (Bitmex) and the descending triangle existed within a much larger descending triangle starting at the all-time highs reached in November 2021, this continues the ascending triangle that began in March 2020.

Bitcoin Price Forecast

Historically, Bitcoin has followed the same cycle that we are nearing the end of four times already, but the cycle does not complete after the parabolic rise and subsequent price fall, rather BTC tends to have a long period of consolidation after a parabolic move. It is the comfort period we are still deeply rooted in, the volatility index supports this. That’s why I, along with other analysts, believe that the next bull run in Bitcoin won’t happen for a while, says my timeline around Spring 2023.

So while I was very pleased with Bitcoin’s ability to break above and hold $20,000, I don’t think we are seeing the start of the next bull run in BTC. That said, the fact that BTC has made these recent gains amid dismal macroeconomic conditions is the real underlying aspect that makes this move so much more than just the rise in dollar value.

Bitcoin as Safe Heaven Asset

What makes me even more optimistic for the future is the role Bitcoin took on this week leading to higher prices. I am referring to Bitcoin’s safe-haven appeal which was evident this week during the election turmoil in the UK where many investors are choosing to exit their long Sterling positions fearing the volatility of England’s national currency and opting to enter Bitcoin as a safe haven play. This week, trading volume in GBP/BTC hit an all-time high as the pound hit an all-time low and fell to near parity with the USD or 1.03 in GBP/USD.

These traders could have gone into gold, but they didn’t. Traders have been actively selling gold throughout this week. Although gold witnessed small gains, they were entirely due to dollar weakness. It seems that the safe harbor claim given to Bitcoin for close to a decade had finally been realized. For that reason, I feel that the price gains are not the most important thing the bulls should focus on, rather it is the transformation that is happening below the surface.