Are We At The Top? Not Yet!

Over the past few weeks, Bitcoin has rallied to approximately 44.5k, showing no significant corrections until recently. This rapid escalation led to an overbought market and excessively bullish sentiment, which led to a substantial correction. This may seem like a typical short-term correction, but it could lead to further decline. Notably, indicators such as funding rates and the Tether premium, previously very bullish, have turned somewhat bearish. Today, the crypto market has re-entered a state of low funding rates, and Tether is closing its discount, suggesting a less bearish outlook. Monday's correction is attributed to the rapid market escalation without shaking out weaker hands. Contributing factors include a potential short-term peak in liquidity, signaled by the failure of precious metals to break out, the recent rise of the USD, potential increases in the CPI in December despite November's lower print, and falling energy prices.

Some analysts have compared the last two months to April-May 2019, which preceded further gains, and that's a reasonable comparison. The market could rally up to 49-53k before having a significant correction. We believe a dip to around 31-33k seems plausible before reaching new all-time highs. In the short term, the market has reached resistance at 42.9k and could dip to 39k to fill the significant CME gap left open for BTC. None of what we have mentioned indicates a market crash or the end of the bull market. Despite the potential for a downturn, the market is now at a level where taking profits makes sense, but excessive bearishness is not warranted. There's a possibility for Bitcoin to drop to 33k in 2024, but going below 30k seems very unlikely. A decline to 30-31k is conceivable, but going below that seems improbable. Some of our analysis suggests that we're approaching our first major correction since the bull market's inception, potentially getting one or two 20-30% corrections before new all-time highs.

Some analysts have compared the last two months to April-May 2019, which preceded further gains, and that's a reasonable comparison. The market could rally up to 49-53k before having a significant correction. We believe a dip to around 31-33k seems plausible before reaching new all-time highs. In the short term, the market has reached resistance at 42.9k and could dip to 39k to fill the significant CME gap left open for BTC. None of what we have mentioned indicates a market crash or the end of the bull market. Despite the potential for a downturn, the market is now at a level where taking profits makes sense, but excessive bearishness is not warranted. There's a possibility for Bitcoin to drop to 33k in 2024, but going below 30k seems very unlikely. A decline to 30-31k is conceivable, but going below that seems improbable. Some of our analysis suggests that we're approaching our first major correction since the bull market's inception, potentially getting one or two 20-30% corrections before new all-time highs.

When Bitcoin reached 44k, Ethereum and others experienced significant breakouts, continuing the 'alt season,' where many cryptocurrencies outperformed Bitcoin. This trend may result in Bitcoin grinding down or moving sideways while capital shifts from Bitcoin to other coins. Smaller cryptocurrencies appear particularly strong, while bigger ones like ETH, XRP, and BNB haven’t been as strong. The truth is that Bitcoin has reached many critical levels and has been massively overbought, while Ethereum, on the other hand, has a cleaner chart, having filled its CME gap and bottomed at a critical breakout zone. Its structure remains bullish and could quickly rally another 15% before topping.

Looking at the broader market, the macro environment remains bullish for crypto. Central banks are pausing and planning cuts while governments continue stimulating economies. Inflation is coming down; the global economy is slowing, and a recession is increasingly likely. Technology is booming, with many tech stocks near or at all-time highs. The bond rally could continue, and stocks are on the verge of new all-time highs. In today's FOMC meeting, the Fed indicated a victory against inflation, although it remains above their target. The economy has been stronger than anticipated, but signs of it slowing down and the impact of the rate hikes are starting to be felt. With a possible upcoming recession being more likely and the challenges for the US government in financing itself by mid-2024, especially as the Fed resumes quantitative tightening, the Fed is being more proactive than it was in 2008 or 2020. A slowing or bad economy tends to be bullish for risk assets as the market anticipates more stimulus. Currently, stocks are near all-time highs and could make their final push above them before forming a trap. Once that happens, we could start talking about a potential reversal. However, until that happens, stocks and crypto have room to run on the upside, especially smaller crypto assets that are usually the last to top in these cycles.

Conclusion

In conclusion, the market is getting frothy but hasn’t yet topped. Altcoins, though appearing overextended, may continue to rally, as overall, they remain undervalued relative to Bitcoin and Ethereum. The momentum is on their side, suggesting that the pre–Bitcoin ATH alt season (with Bitcoin below its ATH) that began in late October is still in play despite Bitcoin's dominance still being on an uptrend. With the Fed’s rate cuts starting in just a few months, while the Fed and Treasury are still pumping liquidity into the financial system, markets might have their ultimate crescendo before topping in the short to medium term.