On-Chain Commentary
- Bitcoin is set to close it’s strongest monthly performance since late 2020
- Near term technicals suggest the possibility for a price pullback
- The degree of upcoming S&P 500 strength will likely provide a tailwind for digital assets over the next few months
Bitcoin will likely close at least +40% on the month, a rare feat for January, historically. This will also likely be Bitcoin’s strongest monthly performance since late 2020. Longer term Bitcoin monthly seasonality data suggests positive forward performance following monthly gains of +40%. Average historical monthly forward performance nears 20% and average three month performance exceeds 50%.
Low timeframe technical analysis, including a rising wedge or channel with declining momentum on RSI, does support a near term pullback in price. This combination of technicals is commonly seen when rallies become overextended and can trap entrants who were late to the party. Support sits at the 200-day moving average (DMA) and round psychological level of $20,000. Alternatively, a breach above $24,000 will likely negate short term reversal bias. Overhead resistance sits at $24,700, the 200-weekly moving average, and $26,750, the yearly pivot.
Regardless of pullback or continuation, a 50/200 DMA cross will likely occur over the next month, the first of these MA crosses since January 2022. Since 2012, this golden cross as it’s known, has only occurred eight times and can lead to extended multi-month bullish rallies.
Additionally, the Fed, Bank of England and ECB all meet this week, with rate hike decision expectations set for 25, 50, and 50 bps, respectively. This relative rate imbalance may allow the DXY index to continue to decline, which has historically provided a headwind to digital assets. Traditional and digital assets markets have tended to hold a risk-off stance going into these central bank meetings, especially when hawkishness is expected. More important, however, is the strength of trend reversal on the S&P 500, which is currently nearing a key level of 4100. Multi-month price structure suggests the possibility of an inverted head and shoulders pattern completion above 4100, a common price fractal which carries a target zone of 4500-4700.
