Last November, FTX suddenly paused customer withdrawals. One of the world’s largest crypto exchanges soon filed for bankruptcy, revealing a scandal that led to $8.7 billion in missing funds. The FTX incident caused capitulation in crypto with Bitcoin seeing 77% drawdown.

With this backdrop, on December 9th, The I/O Fund and The Wealth Umbrella stated in the analysis: “Bitcoin is Going to Rally Again – Here’s What you Need to Know:” 

“Though we are in the 4th bear cycle in Bitcoin's history, the prior 3 cycles suggest where we are in a rare buying opportunity. There is ample evidence to support the $15,500 level is either a major low or very close to a major low. Both the technical and on-chain analysis support this.”

We reiterated this in early February in a follow up analysis: Bitcoin is up 40% in 2023, Here’s Where it Goes NextBitcoin is up 40% in 2023, Here’s Where it Goes Next

“In conclusion, our multifaceted analysis into Bitcoin is supporting the likelihood of a larger trend reversal. This is not confirmed from our end until we see price make that last high in the coming weeks towards the $25,600 region. Interestingly, this new bull cycle is coinciding with a weakening US Dollar. Also, it is accompanied with more central banks being boxed into inescapable corners.”

And then to really drive the point home, we repeated in April: Bitcoin Vs Banks: Here's Where the Price Goes NextBitcoin Vs Banks: Here's Where the Price Goes Next

“What you can clearly see is a completed 5 wave pattern off of Bitcoin’s low. This is usually bullish. As long as $19,550 holds, any breakout above the current consolidation would be considered a buy from our analysis.”

“As long as The Wealth Umbrella’s signal stays in the “green environment” and price holds above $19,550, we will continue adding carefully to our Bitcoin position with real-time trade alerts sent to our research premium members.”research premium members.”

The chart below illustrates our impeccable timing:

The reason this is important is because our firm offers a rare, yet valuable roadmap for this volatile asset. Not only did we call the Bitcoin bottom, but we also called the previous Bitcoin top at the $58,000 range in the analysis Bitcoin Approaches Upside Target: “We have trimmed some in the $55,000 region, and may trim some more if we reach the $65,000. However, we see any large drawdown to be an opportunity for Bitcoin and we will likely enter again if/when this happens.”

Bitcoin is susceptible to a noisy, bifurcation between bulls and bears with extreme statements, such as: “Bitcoin will go to $1 million” or “Bitcoin is a ponzi scheme and will go to $0.” The truth is that Bitcoin has risen 7,000% in the past 10 years and smashed every record in equities in the past 15 years. Yet, it has also weathered multiple 70%+ drawdowns, but then against all odds, is capable of a full recovery within 3.5 years — every time. It bears mentioning that many dot-com companies have not reclaimed their all-time highs in over 20 years following such a selloff. Therefore, if you look at this rationally, it only makes sense to try and participate in this asset while limiting the downside. Most especially, if you can buy at the bottom, which is exactly what we set our readers up to do in 2023.

Our firm specializes in this precise discipline with all tech stocks – which is, participating in the upside while limiting the downside by using technical analysis for risk management. However, in the absence of fundamentals, this process excels at the ultimate high risk-high reward tech asset (crypto).

Our method combines price patterns with on-chain metrics which helped determine when crypto was approaching a meaningful top in early 2021.  As a result, we cut our crypto holdings in half when Bitcoin was trading between $50,000 – $60,000, and then subsequently, our method helped determine when Bitcoin was bottoming at $15,500. By having a strong process for layering-in at the bottom and layering-out at the top, our firm has surpassed institutional tech portfolios every year since inception.

Below, is our updated analysis including what levels must hold for Bitcoin to be a buy.

Bitcoin is Setting Up for a New All-Time High

One year and 150%+ gains later, my firm would like to update you on where Bitcoin will go next. We do see a critical pullback on the horizon, yet the pullback is likely to be shallow for Bitcoin’s purposes. Most importantly, this next pullback has the potential to be the last great buying opportunity for Bitcoin, as the asset could be setting up for a new all-time high. My firm is prepared to buy this next dip and issues real-time trade alerts for every entry and exit. 

Bitcoin’s Next Great Buying Opportunity

In the December 9th report just referenced, we showed a chart that outlined our long-term perspective while Bitcoin was around $17,000.

The above chart, at the time, showed Bitcoin was on major support with momentum shifting to the bulls. It also suggested that Bitcoin was only in a correction within a larger uptrend. Our targets for the coming bull cycle were between $75,000 – $132,000.

At the time, these targets seemed unlikely; however, the technical patterns supported them as long as critical support levels held on the way up. Today, Bitcoin is up 175% from our $17,000 buy rating, and the upper targets remain.

It is our belief that the current pullback will potentially be one of the last great buying opportunities before investors are forced to chase Bitcoin higher. The setup is there, but this depends on if Bitcoin can clear a few, key price levels. 

If we zoom into the pattern that is developing off the November 2022 low, we can see the danger zones, as well as updated critical supports that must hold for this pattern to continue higher. Where I will grow cautious is if the next push higher stalls within the $50,000 – $58,750 region. If the 2023 bounce is only a corrective bounce in a much larger downtrend, this is the zone where this corrective bounce will reveal itself, and likely top.

In the above chart, the 1st major change of character was the opposite of what we saw in 2022. The uptrends consist of vertical moves higher, with overlapping and messy corrections that fail to make new lows. What is important to notice, in blue, is that we have successfully completed 2 series of five wave patterns. Each series pushed Bitcoin higher.

What follows a five wave push is always a three wave retrace. We are now starting the 2nd three wave retrace, which we believe will be targeting between $39,000 – $35,000. If this pullback resembles the prior one – overlapping and in an obvious three wave pattern – then, we believe this will be the last great buying opportunity before Bitcoin goes vertical. This will remain our gameplan as long as Bitcoin holds $28,000 in a deeper correction than expected. If we do break below $28,000, then the larger uptrend we are tracing to $100,000 will be invalidated. This is key as what’s central to risk management is always having a game plan if the primary count fails. For us, the $28,000 price level will act as an emergency brake with minimal downside for the mid-$30s. By having this emergency brake, we can participate in the upside while limiting the downside.

The next major hurdle for Bitcoin will be if/when we enter the $50,000 – $58,750 overhead resistance. The alternative red count on the chart suggests that the 2023 bull cycle is actually a corrective bounce in a very large bear market pattern.  If we get into this zone and see the character of the trend reverse, then we will alter our risk management plan. If Bitcoin can clear the $58,750 resistance, then odds will greatly improve that we are on our way to the overhead targets listed over a year ago.

On-Chain Analysis

By Vincent Duchaine of The Wealth Umbrella

Even though there is not classic fundamental analysis within the crypto ecosphere, there are numerous data sets within Bitcoin’s blockchain, utility, and transaction activity that can act as a unique form of fundamental analysis. This is called on-chain analysis, and it is very effective in helping us understand when to increase and reduce risk within our crypto holdings.

For this type of analysis, we work with Vincent Duchaine of The Wealth Umbrella. His team of A.I. and Machine Learning engineers have devised a way to quantify risk using on-chain metrics, and the on-chain metrics are confirming the upper targets outlined by our technical analysis. Below is a glimpse into some of this on-chain analysis, which we use to better manage risk in the I/O Fund portfolio.

When Bitcoin hit $44,000, the on-chain metrics were suggesting a pullback was imminent. While BTC was reaching fresh 2023 highs, the number of newly created crypto addresses with a non-zero balance had been on a continuous downtrend for a few days. An easy way to think about this is that the demand for crypto was starting to fade while Bitcoin was making a new high. This is a divergence we usually see at a local or cyclical top.

As we were seeing this decrease in demand, it happened to coincide with the % of investors holding Bitcoin for over a year (hodlers) starting to take gains.

With hodlers looking to sell, and not many new buyers in the network, Bitcoin had no other choice than to pull back. But, despite this pullback, which we think will be short lived, our view is that Bitcoin still has more of upside.

None of our on-chain metrics have come close to a reading that indicates a historic top. A good example of this is our proprietary Kwiatkowski Indicator, which is a normalized aggregation of all the different market caps. It was designed to give a consistent spike at bottoms and tops. It called the bottom in November 2022 when it printed a value of -75. This indicator is currently only at 12, for an average value of 65 at the cyclical top. In fact, this value is actually consistent with a reading associated with the beginning of a new cyclical bull run. Indeed, except for the mini-bull run that happened in summer 2019, any other time this indicator went over 12 in the history of Bitcoin, it was the start of a new cyclical bull run.

With hodlers looking to sell, and not many new buyers in the network, Bitcoin had no other choice than to pull back. But, despite this pullback, which we think will be short lived, our view is that Bitcoin still has more of upside.

None of our on-chain metrics have come close to a reading that indicates a historic top. A good example of this is our proprietary Kwiatkowski Indicator, which is a normalized aggregation of all the different market caps. It was designed to give a consistent spike at bottoms and tops. It called the bottom in November 2022 when it printed a value of -75.

This indicator is currently only at 12, for an average value of 65 at the cyclical top. In fact, this value is actually consistent with a reading associated with the beginning of a new cyclical bull run. Indeed, except for the mini-bull run that happened in summer 2019, any other time this indicator went over 12 in the history of Bitcoin, it was the start of a new cyclical bull run.

Same message can be found in the Market Value to Realized Value ratio (MVRV) that recently went to 2.11. The last time this indicator crossed this value out of a bear market was on October 26th, 2020. At that moment, Bitcoin was already at 65% of the total value it reached in the previous cyclical bull run. Strange coincidence, when we reached the same MVRV value last week, Bitcoin was also at 65% of its previous high.

Institutional Adoption: Bullish Fundamental Moment for Bitcoin

Bitcoin has no earnings reports, management overhauls, or supply chain disruptions – therefore, in order to measure what Bitcoin will do next, we must measure sentiment. This is why Bitcoin responds particularly well to technical analysis.

However, we can’t deny that Bitcoin is on the precipice of one of the most bullish fundamental moments in its history, which is widespread access for institutions and retail investors. In January of 2024, it’s expected that Bitcoin spot ETFs will be approved, which will allow ETFs to be backed by Bitcoin instead futures, and in turn, this will allow institutions to hold an allocation to Bitcoin in a manner that is secure and can be liquidated similar to a stock.

We have been anticipating this moment since 2019 when we stated: “One of the biggest hurdles for institutions, however, is not the idea of a world run on digital currencies, but rather the decentralization concept and the need for cryptocurrency storage. Institutional investors need to know the assets are secure, insured, and under the care of a trusted third party, per SEC rules, which requires advisers to keep client funds with a qualified custodian.” ETFs greatly simplify these hurdles.

To attempt to size the demand the ETFs may create, Grayscale has $18 billion assets under management. If we assume 10 Bitcoin ETFs are approved of similar popularity, this could add an additional $180 billion in demand for a limited supply of Bitcoin. As a reminder, Bitcoin is limited to 21 million Bitcoins and the next halving occurs in 2024. Halving can lead to a higher value for Bitcoin as it reduces the number of new bitcoins being generated by the network.

In anticipation of ETFs being approved, central banks have released guidelines that allow banks to hold up to 2% of reserves in crypto. The assets of central banks total roughly $44 trillion, and so this would be roughly $800 billion, or equal to Bitcoin’s market cap, if fully utilized.

Conclusion:

Last week, our firm was on Fox Business News where Charles Payne asked Lead Tech Analyst Beth Kindig for a price target. Using the analysis above she stated on live TV that our price target is $100,000 – minimum. This target is backed by both technical and on-chain analysis; the same analysis that has helped us navigate meaningful turns in Bitcoin since 2019.

Of course, investing is never as easy as laying out a price target and holding on. In this report, you got a glimpse into our active process that has been quite rewarding within the crypto space. Further, we laid out what steps Bitcoin must take in order to reach our long-term price target as well as the price at which we pivot to protect our gains. We reserve our entries and exits for premium members. If you’d to know when we are buying or selling Bitcoin with real-time trade alerts, then please consider subscribing below.

Disclaimer: This is not financial advice. Please consult with your financial advisor in regards to any stocks you buy.

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Two months ago, we announced that we are buying Bitcoin in the analysis: “Bitcoin is Going to Rally Again, Here’s What you Need to Know.

Here is what we said on December 9th:

“Though we are in the 4th bear cycle in Bitcoin's history, the prior 3 cycles suggest where we are is a rare buying opportunity. There is ample evidence to support the $15,500 level is either a major low or very close to a major low. Both the technical and on-chain analysis support this.”

Due to technical analysis coupled with the on-chain analysis provided by WealthUmbrella, it became evident that we were at a major low and we alerted our followers to this important moment. Since then, Bitcoin is up 40%, and we view the next correction as potentially another moment when we may add to our position. When we add to our positions, we issue real-time trade alerts plus position sizing for our research members. Our firm is known to navigate Bitcoin’s volatility particularly well even in challenging markets.

Below, we update the new developments in Bitcoin’s price patterns as well as the on-chain metrics that we tend to see around historic lows. We will also take a look at the fundamental thesis surrounding Bitcoin’s utility, and why a globally indebted economy coupled with structural inflation will only benefit from Bitcoin.

Our first sign of this problem happened when the Bank of England abandoned its fight against inflation to support its currency. This was recently followed when we saw signs that the Bank of Japan could potentially lose control of its bond market, as they started bending to inflationary pressures. It appears that central banks are being boxed into a winless corner where they have to choose between fighting inflation or causing a fiscal spiral in their economies. As these problems grow, Bitcoin’s alternative to centralized fiat system will become more attractive, which I believe is showing up in the price action.

The Bank of Japan, Inflation and Bitcoin

Last month, the Bank of Japan (BoJ) surprised markets by widening their 10-year treasury bond from 0.25% to 0.50%. This may seem small, but this move roiled markets and sent ripple effects across asset classes globally, The reason the change in bond yields had a strong effect is because Japan has excessive public debt, and the concern is it will cost more for Japan to now service this debt.

Most countries are dealing with high levels of debt due to a decade of negative to zero rates. However, Japan’s debt is one of the worst globally with a debt-to-GDP ratio of 262.5%.  Like most central banks coming out of the Great Financial Crisis, The Bank of Japan embarked on a series of programs to combat deflationary forces. Unlike most economies, Japan’s rapidly declining population, amongst other factors, had their central banks combating deflationary forces that most of the world did not have to address.

As a result, Japan decided to take central bank engineering one step farther. They set a goal of reaching a 2% CPI  at any cost. So, they announced a new Yield Curve Control (YCC) policy. In order to maintain a yield below where the market would naturally price it, the BoJ had to sacrifice their balance sheet to achieve this goal. In brief, any bond that traded over their target, they bought.

One of the by-products of artificially low rates in countries that issued public debt in their own currency was a very high public debt-to-GDP ratio. With rates at a persistently low level, governments were encouraged to borrow under the assumption that inflation will likely always be under control.

What this means is that Japan, as well as other countries with high Debt-to-GDP ratios, cannot tolerate higher yields. The higher the yields, the more it will cost the Japanese government to service these debts. If they go too high, then the Japanese government runs the risk of defaulting on their loans.

This is not a problem as long as inflation is subdued. However, like the rest of the world, Japan is now dealing with a high CPI around 3.7%, which is much higher than their target.

So now, they appear to be approaching the end-game scenario. They have to combat inflation by raising rates, but if they raise too high, the bond market will lose confidence in Japanese debt. This is what happened in England last year when the new administration announced a sweeping spending bill coupled with tax credits in the face of a growing energy problem. In short, the bond market stopped playing ball. As debt got sold and yields climbed, this left the Bank of England no choice but to once again become the buyer of last resort, while having to deal with high inflation at the same time.

If the 3rd largest economy in the world, and second most important currency loses control of its bond market, the Bank of Japan could become one of the biggest stories in 2023. How does this tie into Bitcoin? Bitcoin is viewed as an alternative to the centralized fiat money system. Because it is not centralized, it is not prone to the results of monetary manipulation and corruption. Bitcoin is an easy and secure way out of a country’s fiat system, for better or worse.

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Whether one agrees or not is irrelevant. The perception that Bitcoin is an alternative is what matters, just as the perception that gold is an alternative is important, as well. The more problems that unfold with the inevitable crumbling of the global fiat money system in light of systemic inflation, the more a country will likely adopt it.

We see a definite correlation between corruption and crypto adoption. This is a correlation that has persisted for years.

The reason for this correlation is because with systemic corruption comes economic hardship, heightened inflation, and in some instances, hyper-inflation. Prior to Bitcoin, citizens have historically had no convenient way out of their country’s currency, so they have been trapped.

Not all economic hardship is the result of corruption. We’ve seen global central banks embark on the greatest monetary experiment in human history, marked with countless policy errors and questionable decisions. In the U.S., we see a clear correlation between the strength of the U.S. Dollar and Bitcoin.

When the dollar is weak, or we see the FOMC flinch in light of needing to tighten, Bitcoin catches a bid. So, clear correlations and utilities are being developed with Bitcoin that lines up with the monetary issues unfolding. We only expect this relationship to strengthen into 2023 and beyond. Structural inflation is likely here to stay, which means that global central banks will inevitably follow Japan in Yield Curve Control programs to prevent a fiscal spiral. There is simply too much debt in the system, and not enough buyers of new issues. This will only improve Bitcoin’s attractiveness.

On-Chain Analysis

Bitcoin does not have earnings reports. You cannot do classic fundamental analysis on this asset to help determine underlying strength. For this reason, crypto has been leaning on technical analysis predominantly, until recently. Some researchers have uncovered that Bitcoin offers its own unique form of fundamental data found on the public blockchain. This data, called on-chain data, allows us to track several patterns that can provide clues to major turning points. The following data was provided by Vincent Duchaine of WealthUmbrella, whose company has developed an automated algoriths to help retail investors navigate risk-on and risk-off environments. 

In the previous article, we noted that various on-chain indicators indicated that a bottom was likely.

“Overall, most on-chain metrics from any layers of the Bitcoin ecosystem is providing rare readings that tend to flash around major bottoms.”

Specifically, the indicators tracking money flow into and out of exchanges saw a peak in June 2022, which was the third highest recorded in bitcoin history. Despite the FTX incident in November, this indicator was forming a lower high, which suggested that fear was fading.

Additionally, Bitcoin’s price was within a range that we rarely see, and has historically marked major lows.  What the below range is measuring is the relationship between Bitcoin’s market cap (price x the number of coins in existence) and its thermos cap (price of each coin when it was last purchased x the number of coins in existence). Bitcoin’s price was in the middle of our “value-zone” that has marked larger turning points in the past.

Further evidence that a new bull cycle is developing can be seen with the Spent Output Profit Ratio (SOPR). This is calculated by examining all daily transactions on the Bitcoin blockchain and determining if the coins were exchanged at a profit or loss based on the price at the last time they moved. A ratio of 1 indicates that all bitcoins moved on a given day were sold at the same price as they were bought. A ratio over 1 means that on average people sold at a profit, and under 1 means at a loss.

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The SOPR signal can be noisy on a day-to-day basis, but when filtered correctly, it can be a good indicator of the current market phase. It can prematurely signal a top and may lag in signaling a new uptrend. As of last week, this signal flipped positive, and it is worth noting that it has not given any false signals throughout the history of bitcoin, despite sometimes being late in calling an event.

The above analysis is only a handful of metrics used to improve our odds at catching a new bull cycle. The final piece of evidence will come from the developing price pattern from the 2022 low. As of now, we only have 3 waves up off the recent low. We need this to get to one more high to complete the much anticipated 5 wave pattern that tends to mark a bigger trend reversal. If we do get that last push higher, the following pullback will be where we add to our position.

In conclusion, our multifaceted analysis into Bitcoin is supporting the likelihood of a larger trend reversal. This is not confirmed from our end until we see price make that last high in the coming weeks towards the $25,600 region. Interestingly, this new bull cycle is coinciding with a weakening US Dollar. Also, it is accompanied with more central banks being boxed into inescapable corners. Structural inflation is likely here to stay, and it will not be easy for indebted country’s to control this.

This will only lend support to Bitcoin’s original thesis that there is no need for the trusted middle man within a peer-to-peer transaction. Centralizing our monetary system allows for corruption, and policy mistakes that can, and do, lead to 2008-style events. The deeper we go into the Central Bank monetary experiment, the more apparent it is this idea has become 15 years later.

This Thursday, 2/9/23, at 4:30 pm EST we will host our weekly webinar where we go through various broad market charts, as well as individual tech stocks we are targeting for entry and exits. We also provide a weekly update into Bitcoin that will help our premium members better manage risk. An example of this is when we put out an alert to sell Bitcoin when it topped last March (behind paywall) with some discussion on social media leading up to this trade alert. I/O Fund provides real-time trade alerts and an audited, actively managed portfolio. Learn more here.

In August of 2019 we released our first premium report on Bitcoin. At the time, Bitcoin was trading between $10,000-$11,000, following a bounce greater than 200% in less than a year. 

We believed Bitcoin had provided strong evidence that a meaningful low was put in, and that a new bull cycle was starting. In our premium report, we stated that we expect a drawdown to at least the $7800 region, and that we would wait for this to happen before starting a position. More importantly, we were targeting the $65,000-$75,000 region in the coming year. 

Here’s a snapshot of our 2019 report:

This was a bold call at the time, — and yet the call materialized. The same system we used to target the $65,000 region in 2019 is the same system we are using to target the $88,000 – $110,000 region in the next uptrend. 

We work in probabilities, and therefore manage risk accordingly. As long as any additional weakness in Bitcoin holds the $14,650 level, we believe that the volatility that we have been experiencing since November 2021 is part of a larger uptrend, with the stated targets currently in place.

Technical Analysis and Bitcoin

Bitcoin has no earnings reports, management overhauls, or supply chain disruptions that can affect its price. In other words, there isn’t a lot of news that moves the crypto market, yet this particular market moves all day and all night. It’s human nature to assume that a news event is the cause, yet this is simply not the case with crypto. Human sentiment is the primary driver of the crypto space, which is why technical analysis works particularly well. 

Anytime humans come together in a codified arena and begin trading an asset with their instinct for security as the primary driver, patterns develop across price history. This is what we are measuring. One of the simplest patterns to measure is that an uptrend moves in 5 waves up, then corrects in a 3 waves pattern down. Once we get 5 waves up and 3 down, we then repeat this pattern. As of now, since the 2018 low, we only have 4 waves in place, which implies that we have one more 5th wave push before the larger bull cycle is over.

As long as any additional weakness holds the $14,650 level, then the above setup is still intact, which is targeting the $88,000 region at a minimum. However, below $14,650 and the probabilities shift that the current bull cycle is over.  This means that the above 5 wave structure would fail, and we would need to see a larger reset at lower levels to start a new bull cycle. This is a crucial caveat to risk manage the potential of a renewed uptrend, and also sets up an attractive risk/reward at current prices.

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Steps to Confirming a Low

When confirming a low, there’s a specific criterion I am looking for. The first of which is do we have a complete corrective structure in place? Corrections tend to move in 3 waves, where the final wave down unfolds into a 5 wave structure, tends to be relatively dramatic, and is met with very negative sentiment. 

As you can see above, we have a 3 wave correction where the final C wave is a clean 5 wave structure that unfolded in a waterfall-style event. Furthermore, regarding sentiment, the crypto fear/greed index has been in extreme fear for well over a month. In fact, on June 19th the reading was at a 6, which is one of the lowest readings in its history.

So, the first step is in place. Can we extend lower? Of course, but the structure is already quite stretched. Next, I want to see a clean 5 wave bounce off the low. The reason for this is that uptrends move in 5 wave patterns. This is also fractal, so a small 5 wave pattern builds into a larger one, and so on until you have reached your target. So, a micro 5 waves off a low suggests that we are starting a new uptrend.

As you can see above, we do have 5 waves off the low in black, followed by a 3 wave retrace that holds the low. As long as any retrace holds the $19,000 support, the micro 5 waves off the low remain intact. Below $19,000 and it opens the door to lower lows, and will also take us closer to the critical $14,650 support. 

So, we have 5 waves up and 3 down, and this is now building into a larger 5 wave structure. If correct we have our first larger wave in place as well as our 2nd. The final step is that I want to see a breakout above the top of the larger first wave, which is at $21,650. This typically looks like a cup and handle pattern, and we will need to see a sustained break above this region. A push above this level, and the odds begin to increase substantially that we are beginning the final 5th wave in the larger uptrend.  

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The US Dollar and Bitcoin

Another interesting correlation is between the Dollar Index (DXY) and Bitcoin. Many will argue that DXY is not a true representation of the USD, and that a trade weighted index is more appropriate. However, the correlation is not far off, and there is much more price history in DXY to analyze than in the trade weighted dollar. For this reason, DXY provides a meaningful correlation comparison to monitor because when the dollar is strong, Bitcoin is weak and vice versa. 

The above chart is comparing the US Dollar Index in green to Bitcoin. Note the inverse correlation. As the USD strengthens, Bitcoin weakens, and vice versa. As of now, DXY is in a complex topping process, and I believe is lining up with the renewed uptrend in Bitcoin. 

The above chart shows DXY signaling its first weekly divergence since its last top. When you see price make a higher high, while the momentum indicator below makes a lower high, it tends to signal that momentum is fading. This tends to proceed tops, which is showing up now.

Relative Strength Index (RSI)

The Relative Strength Index (RSI) is a way to measure the buying/selling pressure within a trend. In other words, it’s a way to measure the health of a trend and can provide early warning signs of a reversal. 

On a weekly chart, Bitcoin recently hit the most oversold conditions since 2011. Historically, when bitcoin’s RSI moves below 30, it tends to mark a larger low is being put in place. In June, Bitcoin’s weekly RSI hit 25, which is lower than the 2017 bubble popping and subsequent 84% drawdown that followed.

This is significant because what we have is a Negative RSI Reversal pattern happening on a large scale. This is when the RSI makes a lower low, while price makes a higher low. This pattern tends to occur in uptrends, which I believe Bitcoin is in an uptrend on a large degree.

These are all positive signals, but Bitcoin still has a lot of work to do in order to signal a meaningful low is in place. For example, price has history and so does the RSI. The weekly RSI tends to revolve around the 54 region. Most uptrends will hold this region and turn back up, while the opposite is true in downtrends. 

Note the blue arrows above. These are instances where dips within a larger uptrend hold the 54 region on the RSI, and then turn back up. These are the best regions to Buy the Dip. On the other hand, in periods of significant weakness, that 54 region acts as resistance. The 54 region would flip to be areas where you would sell the rip. 

Note how the last red arrow marketed the resistance just before the larger waterfall event happened in Bitcoin’s recent drawdown. This level will need to be reclaimed before any renewed strength can be shrugged off as just a bear market bounce. Right now, bitcoin’s weekly RSI is just over 30, so it has a lot of work to do.

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In conclusion, as long as we maintain over $14,650, the larger structure suggests that Bitcoin has one more push higher in the current bull cycle. With the USD starting to show signs of topping out, this lines up with the technical signals we are seeing in Bitcoin, which is suggesting a tend reversal is underway. 

Furthermore, it’s important to recognize how much Bitcoin has scaled in late 2020 – 2022. Bitcoin last traded in the $19,000 region in December of 2020 as well as December of 2017. While the focus recently has been on BTC’s price decline, it’s important to keep in perspective that over the last 10+ years, BTC transactions and adoption has been on a steady upward trend with minor pullbacks along the way. 

We can also see user adoption is increasing by monitoring the number of Bitcoin wallets in circulation.

Therefore, despite the immense fear in the marketplace, we believe Bitcoin can sustain a higher price than its previous all-time high if the technicals we outlined above remain intact. As stated, it’s important to recognize that the probabilities favor a 5th wave push higher. This is coming off the heels of a very stretched and complete corrective structure and sentiment that is notably worse than the 2018 low. If Bitcoin can break above the $21,650 level, and sustain a push above this region, the odds will further favor the start of a final 5th wave push higher.