Bitcoin (BTC) is currently experiencing a downturn, with its value declining by almost 15% from its yearly peak of approximately $31,000. This drop can be attributed to recent regulatory crackdowns on major crypto exchanges Coinbase and Binance, as well as the Federal Reserve’s hawkish stance on future economic policies, which has further intensified the sell-off.
Nevertheless, Bitcoin has shown a remarkable 60% year-to-date (YTD) increase and has managed to maintain a technical support level at $25,000. Several factors suggest that a new bullish cycle may be on the horizon.
The upcoming Bitcoin halving, an event programmed to occur every four years that reduces the rate at which new coins are generated by half, is scheduled for April 2024. Historical data indicates that the three previous halvings in 2012, 2016, and 2020 were followed by substantial price rallies and the establishment of new all-time highs for Bitcoin.
For example, since the previous halving in May 2020, BTC has surged by an impressive 276%. Analyst Lark Davis suggests that the market will likely remain in an accumulation phase until the next halving and predicts that Bitcoin could test its record high of $69,000 within the next 18-24 months. Some analysts even anticipate the price soaring to $160,000 by April 2024. The anticipation of BlackRock’s Bitcoin exchange-traded fund (ETF) approval by the U.S. Securities and Exchange Commission (SEC) has also contributed to renewed confidence in a potential BTC price rally leading up to the halving.
As an investment firm managing a staggering $8.5 trillion in assets, BlackRock has enjoyed a near-perfect track record of ETF approvals with the SEC. The SEC is expected to respond to BlackRock’s application around March 2024, just a month before the halving. If approved, many analysts argue that this could significantly enhance Bitcoin’s bullish prospects post-halving. Crypto Tea, an analyst, notes that BlackRock is aware of the impending Bitcoin halving and understands that as global hyperinflation persists, new supply will decrease while demand continues to rise. Being asset managers, they seek to capitalize on Bitcoin’s performance before their competitors do.
Recent regulatory actions by the SEC against crypto exchanges like Binance and Coinbase have put significant pressure on top altcoins, particularly those categorized as “unregistered securities.” This development has coincided with Bitcoin’s dominance in the crypto market surpassing 50% for the first time in two years. Consequently, capital is shifting from altcoins to Bitcoin, as the latter is not considered a “security” by the SEC. Therefore, BTC is viewed as a relatively safer investment compared to the more than 60 cryptocurrencies classified as “securities” by the regulator.
MicroStrategy cofounder Michael Saylor predicts that this trend will drive Bitcoin’s market capitalization to reach 80% of the total crypto market in the coming years. He emphasizes that regulatory clarity will be a catalyst for Bitcoin adoption, alleviating the confusion and anxiety that have hindered institutional investors. As a result, Bitcoin’s dominance will continue to grow as the crypto industry gravitates towards BTC and gains mainstream acceptance.
From a technical analysis perspective, Bitcoin’s longer-timeframe charts depict a clear bull flag pattern, indicating the potential for an upward continuation of its ongoing recovery rally. A bull flag pattern resolves when the price breaks above its upper trendline and ascends by a magnitude similar to the height of the previous uptrend. Accordingly, the target for Bitcoin’s bull flag is set around $35,500, a level that served as robust support in May 2021 and May 2022.
However, to initiate a new bull cycle, Bitcoin must decisively close above $35,500.
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