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Analysts' Insights

Analysts' Insights

Decision Time - by Markus Thielen

Halving years see Bitcoin sell-off into March.

The average Bitcoin return during halving years (2012, 2016, & 2020) sees an initially rally of +17% (Dec 31, 2023 BTC @$42,265 +17% -> $49,450) – hence our $50,000 price target for January 2024. Only to then quickly reverse and decline into a mid-March low of -14% ($36,350). This is why we worry about an early fakeout rally.

Trading signal warned: short-term weakness.

One of our trading signals turned bearish on Bitcoin for the first time since August 2023 and warned of a -7% decline within the next two weeks. This signal indicates when a breakout attempt could fall short of follow-through buying, and prices would reverse quickly.

Market reluctantly hedged: 100% implied vol.

Consensus expectations are that the SEC will approve Bitcoin ETFs by January 10, 2024 (Wednesday). Implied volatility has increased to 100% for this event, with market expectations for a +/-7.8% move by Friday this week. Bitcoin could be trading at $40,600 or $47,400 by the end of this week based on traders' expectations.

Bitcoin's funding rate collapsed from +66%.

The funding rate signaled massive long position building in leveraged futures products. Throughout 2023, the funding rate traded at a 5-10% premium, while during November and December, it started to increase to 25%. By early 2024, the rate even increased to +66%, which was unsustainable in our view.

Bitcoin might be technically vulnerable.

Even a positive Bitcoin Spot ETF approval could see profit-taking. However, as leverage has been flushed out of the market, the downside might be limited. We remain constructive for 2024 but note that Bitcoin has tended to retest resistance levels, with the exception of the $36,000 to $38,000 range, which could be retested.

Written by Markus Thielen, Head of Research & Strategy at Matrixport. Author of Crypto Titans.

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