FX.co ★ Bitcoin could reach $100,000 by year-end

Bitcoin and Ether made another leap higher and are becoming closer to a proper bull trend. We still cannot identify the reasons for the latest sharp rise in digital assets. Recall that the two most important recent developments for the crypto world were, if anything, negative rather than positive. Central banks (notably the Fed) have begun monetary tightening, which increases demand for safe assets such as bank deposits and government bonds. The CLARITY Act, a bill intended to regulate crypto investment in the US, again failed to progress through Congress. By conventional logic the crypto market should have fallen rather than produced another explosive rise. However, as we warned earlier, pumps do not need reasons, and there is no logic to them.

Meanwhile, Robert Mitchnik, head of SRX Global Asset Management, offered his year-end forecast for Bitcoin. Mitchnik said that if the current bullish trend continues, digital gold could rise to $100,000 by the end of the year. That is another bold forecast: if Bitcoin is bought, it will rise. Recall that traders derive their targets either from technical signals or from fundamental events. Fundamentals continue to indicate there are no drivers for Bitcoin growth. Low spot demand and thin trading volumes on exchanges point to the fragility of the current impulse. Technical indicators are overbought. Therefore, the only reasonable forecast at present is for a decline. That does not mean Bitcoin will necessarily fall: if for some reason—for example, a deliberate pump—market makers continue to buy Bitcoin, the price will indeed rise. But how can one predict the actions of large players when there are no concrete, clear grounds for growth? It follows that the only basis for opening long positions may be pure belief in further appreciation.

Mr. Mitchnik also noted that the key growth factor for the first cryptocurrency is liquidity. In plain terms, if the money supply expands or capital exits other markets, Bitcoin would be a natural beneficiary. The more cash investors hold, the easier it is for Bitcoin to attract demand. In our view the probability of a Bitcoin decline remains high, as does the risk of a deviation of the upper border of the daily sideways channel.

Trading recommendations for BTC/USD

Bitcoin shows all the signs of the start of a new "bull" trend. This trend begins, as is often the case, with a pump lacking concrete reasons. The Fed has not started cutting rates, and the CLARITY Act has not passed. In the short term on the daily chart, Bitcoin may be in a corrective phase because the price reacted to a bearish FVG. Also note that the current breakout beyond the daily sideways channel may be a deviation—yes, a deep deviation, but a deviation nonetheless. If that is the case, Bitcoin can still fall back to $57,500. On the 4-hour chart both long and short positions can be considered locally, but the most relevant current pattern is bearish. On the 4-hour TF, expect a new drop after the second liquidity take at the recent highs (a deviation). We believe a fall to $75,500 is quite likely this week.

Trading recommendations for ETH/USD

On the daily TF, the technical picture for Ether has changed completely in a matter of days. Ether may now be beginning a new uptrend. However, traders should rely primarily on the weekly chart, where Ether could head to $4,800, the upper boundary of a five-year sideways channel. On the daily TF the first bearish FVG failed to produce a strong reaction; the next FVG might. Bitcoin has also worked off the nearest bearish FVG on the daily TF, so both cryptocurrencies could be in a corrective phase in the near term. Recent gains in digital assets have been driven largely by pumps. At present there are more fundamental reasons for a decline in both cryptocurrencies than for sustainable growth.

Illustration notes

CHOCH — a break in trend structure.

Liquidity — liquidity, stop losses, and pending orders that market makers use to build their positions.

FVG — an area of price inefficiency. Price traverses such areas quickly, indicating the absence of one side; subsequently, price tends to return and react at these areas in continuation of the main trend.

IFVG — inverted fair value gap. After a return to such an area, the price does not react but breaks through impulsively and then retests from the other side.

OB — order block. A candle where a market maker entered a position with the aim of taking liquidity to form its own opposite position.