BTC is rallying, but can it continue?

In the past few weeks, there has been a lot of news emerging about the potential approval of a Bitcoin ETF, which would give a tremendous boost to the cryptocurrency market if it is realized.

An ETF is a financial product that tracks the price of an underlying asset, allowing investors to gain exposure to that asset without directly owning it. A Bitcoin ETF would function similarly, providing investors with an opportunity to invest in Bitcoin through a regulated exchange-traded fund. It could potentially make it easier for traditional investors and institutions to participate in the cryptocurrency market without the need to directly hold or manage Bitcoin.

The concept of a Bitcoin ETF has generated significant interest and debate due to its potential impact on Bitcoin's liquidity, price discovery, and market accessibility. Proponents argue that a Bitcoin ETF could attract institutional investors, increase market transparency, and potentially stabilize the cryptocurrency market. On the other hand, skeptics express concerns about market manipulation, regulatory challenges, and the potential for increased volatility.

Due to the recent news of multiple banks filing for a Bitcoin ETF, we are seeing strength in BTC.

BTC 1-day chart

Since June of last year, we have been observing the range on the BTC chart, to which the price has been consistently responding beautifully. A range is one of the most reliable forms of support and resistance, and it proves itself once again in this chart. We can see that after breaking out of the range, BTC came back down for a retest. This retest is indicated by the green circle on the chart and precisely marks the point at which the price bottomed out. From this point, BTC has surged straight upward without any form of a pullback. This push is likely primarily driven by the ETF news, which has created FOMO (Fear Of Missing Out) among market participants. As a result, buyers are eager to enter at higher levels, fearing they might miss out on the opportunity.

As we can see, BTC has reached the yearly high at $31,037 after the strong push in the past week. The price briefly surpassed this yearly high but quickly fell back below it. This suggests that it may be a liquidity sweep, and it would be logical for the price to correct to lower levels. Ideally, I would like to see BTC bounce around $28k and then continue to make new highs from there. However, there are no strong support levels on the chart that are close to the current price. The only significant support level is deeper in the form of the daily demand zone at $26.2-26.7k. As mentioned, I prefer not to see the price retrace that deeply as it would indicate weakness to me.

ETH 1-day chart

What is striking is that ETH is significantly lagging behind BTC. We just saw BTC touch the yearly high, while ETH is still more than 15% away from this price level. This indicates that ETH is weaker than BTC, further reinforcing the idea that BTC's rise is primarily driven by ETF news.

If you're considering trading, it's important to take into account the strength of BTC compared to ETH. If you want to go long in the market, it would be wisest to go long on the stronger of the two, which is BTC. On the other hand, if you want to go short, it's advisable to look at the weaker of the two, which in this case is ETH. The next immediate support level for ETH can be found around $1750.

BTC.D 2-day chart

As mentioned earlier, ranges are a powerful tool for predicting the next move in the market. From the range low, you expect the price to go up, and from the range high, you anticipate the price to go down. However, when the price consolidates below the range high, as BTC.D has done in the green box, you need to be cautious. Consolidation below resistance is a sign that the range high is becoming exhausted, and a breakout from the range may be imminent. A breakout of the range high often brings significant momentum, as we can observe on the BTC.D chart.

The next resistance zone is significantly higher than the current price, so it is advisable to proceed with caution when it comes to altcoins and focus primarily on trading BTC for now.

We will be back with an Altcoin Update on Friday! See you then!

Written by: Luuk Koolen