It’s a big year for Bitcoin: CME is launching options early this year, BAKKT continues to grow in volume, and of course, the third halving is months away. With the exception of the 2018 bear market, BTC has typically finished Q2 very much in the green. With the upcoming halving in May, I would say it’s a good bet we see similar green performance in 2020.
What can we expect this year? After a very poor second half of 2019, it’s quite probable for us to see some strong upward momentum in the first half of 2020 leading into the halving. Coming into the new year, Bitcoin continues to chop around the same range it has been stuck in for the last 6 weeks. Whichever direction this range breaks should set the trend for the first quarter of this year.
For traders (and holders), there are a number of important questions and scenarios to consider:
1) Has the macro low been put in, or is there a chance that we see new lows before some sort of rally?
This is the big one. While Q2 has traditionally been a time of strength, January has typically been a red month. However, considering July through December of 2019 saw a pretty steady downtrend without much follow through to the low end, there definitely is a case for $6400 being the macro low.
Looking at the previous capitulation move in 2014-15, there are definitely some similarities. After the final capitulation move, the price spent more time in the depths in 2015. However, after breaking up past this level, price was never able to close back down below into it on higher time frames (HTF). In the past 6 weeks, we have seen price test this level twice with strong buying every time we have dipped under $7000. Price now sits right around HTF resistance. Any strong move up through here would certainly point towards the low being in.
It is unlikely that price would break up past major resistance into the $8000s to simply fall back down and set a new low. That said, until this range is resolved, it’s up in the air.
2) If the low is in, what is likely to happen next?
If the low is in, the next major high time-frame resistances are at $7800, $9500, and $11500. Bitcoin does not usually consolidate for weeks and weeks to move a few percent. Whichever way the range breaks should lead to a strong follow through in the weeks thereafter. Assuming the low is in, and the range breaks up, after the immediate resistance levels around $7800-8200, there really isn’t anything standing in the way until $9500.
3) If the low is not in, what is likely to happen next?
If the low is not in, the next major high time-frame support is in the $5000s. Weekly MA200 is also sitting around here. Buying at this level looks like it would be a safe move. Price has never trended under MA200 on the weekly. On the off chance that we moved below and began trending under, we would be in completely new territory.
4) Will the halving lead to an LTC-esque halving event where price rallies hard leading up to the halving, but ultimately flops post-halving?
This is always a possibility. During the last halving, price rallied hard early and began to correct prior to the momentous event, eventually bottoming around -40% from the local high shortly following the halving. LTC also experienced a similar phenomenon during both of its halvings. With that said, each big dip was an amazing buy opportunity for the following 18 months.
The biggest takeaway here is: Be cautious going into the halving, and if there’s a strong pullback following, it’ll likely be an opportunity.
-Kevin
