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Monthly Bitcoin RSI - Bullish Breakout
It’s true.
The Monthly BTC RSI has broken back into the Macro Red Wedge.
The Macro Red Wedge is generally where the RSI behaves, meandering within it during market cycles, moving from the bottom of the Wedge in Bear Markets to the top of the Wedge in Bull Markets.
The RSI shows us that the market is preparing itself for a new trend.
To fully confirm this, the RSI would need to turn the bottom of the wedge into new support.
So, the RSI has exceeded the 2015 and 2019 Bear Market Bottoms, but it would be a strong confirmation signal if the RSI were to dip into this green area and turn that region into new support.
What’s interesting about the RSI right now is that it is closely mirroring Bitcoin’s price.
So if the RSI were to indeed dip soon, so would BTC’s price and the RSI would be looking for a Higher Low and so would BTC’s price.
Sometimes, the RSI and price are decorrelated, especially if you look at the Weekly Bullish Divergence from June 2022 to November 2022 where the RSI made Higher Lows and price Lower Lows.
In any case, the RSI is showing us that it is ready for a new trend.
But other metrics show us that there is still a bit to go for BTC to properly confirm the new trend.
Let’s look at some of these metrics and talk about the confirmation price points for a new Bull Market….
Macro Downtrend
If history repeats with a breakout beyond the Macro Downtrend occurring 366days to 396 days prior to the Halving, then that breakout should come at the earliest in March and latest in April.
And once that breakout occurs, an uptrend will emerge.
After an initial breakout uptrend, BTC would then enter a multi-month consolidation period heading into the Halving, with scope for a Pre-Halving retrace a few weeks pre-Halving.
The pre-July 2016 Halving saw a typical sideways range form whereas pre-May 2020, that consolidation phase occurred within a downtrending channel, with a March 2020 black swan crash from the channel before recovering back into the channel.
In any case, it’s clear a macro uptrend will emerge upon breakout beyond the Macro Downtrend.
About both Macro Downtrend breaks suggest to us that a new immediate uptrend beyond this Macro Downtrend would last 3-months.
In 2015, BTC broke the Macro Downtrend and then retested it the following month before enjoying 3-4 months of upside (3 months if we discount the post-retest basing candle near the key Macro Downtrend trendline).
In 2020, a clear three month uptrend emerged.
So it may be possible that a breakout beyond the Macro Downtrend this time would also yield a 3-month uptrend.
So a breakout in March 2023 would see a June 2023 local top and a breakout in April 2023 would see a July 2023 top.
It will be interesting to monitor this new trend when it occurs.
And the key thing to prepare for potentially selling the breakout local top is asking ourselves exactly when will the breakout occur?
Because if BTC were to break beyond the Macro Downtrend this month, that would mean price would need to break the $28,000 level.
With around a week left to go in January, that seems unlikely.
So in February the price point represented by the key trendline is $26500.
And in March 2023, the price point is ~$25000.
When could it breakout?
It’s important to note that the Summer highs at around $23400 are still causing problems for upside mobility from BTC.
And if this resistance continues to plague price this month and even sets BTC up for a retrace as part of a retest, then this ~$23400 could still be a level to contend with in the latter parts of February.
So as long as $23400 isn’t breached, we may see this level align as a confluent resistance with the ~$25000 - in which case breaking both would be the confirmation of a new macro uptrend.
But that being said, it will get easier for BTC to break the Macro Downtrend with each passing month simply because it is a sloping resistance and as a result an increasingly easier target to surpass.
Because BTC rallied around +40% this month and perhaps adding on another few % to reach that $28000 Macro Downtrend price point this month may be a tall order, given how much it has already rallied thus far.
The 20-Month MA: The Confirmation Signal
The last thing I’d like to mention today is the 20-month MA (orange).
We won’t have to worry about it until the Macro Downtrend is broken so this is an analysis out of foresight.
Because the 20-month MA is slowly aligning with the green area, which used to be a major support, but may become a new major resistance.
However - historically, in a new Bull Market, BTC has been able to break this 20-month MA easily.
Which leads me to believe that that green area won’t act as much of a resistance once we get there.In fact, it’s quite possible that BTC will overextend beyond it, much like it did in the June 2019 rally.
In June 2019, that overextension was around +96%.
Of course, this time around I wouldn’t expect such an upside deviation beyond the 20-month MA simply because that would imply a revisit of old All Time Highs, which doesn’t tend to occur in a Candle 3 in the Four Year Cycle.
Nonetheless, an upside deviation of some sort could take place, even if it is 25% to 40%.
So $45000 (25%) to $50000 (40%).
Of course, another thing to factor in is the change of this 20-month MA. Over time, it will decrease, which means that the price to break it will get lower.
And after the upside deviation, it will be all about the retest of the 20-month MA as support.And there could be many retest attempts of the 20-month MA during that post-local top consolidation/pullback period, with scope for downside wicking below it.
I think a lot of the post-local top era would revolve around the 20-month MA or just below, whereas the new Candle 4 in 2024 would actually offer a new opportunity to accumulate around ~$20000 once again as per my Twitter analysis below:
That’s all for today - thank you for reading.
~ Rekt Capital
P.S.