Bitcoin Cracks $30K, but for How Long?

Bitcoin (BTC) breaching $30,000 for the first time in 10 months answers questions about its resiliency while broaching new questions about its ability to hold its price at higher levels.

If the back half of 2022 represented the heart of crypto winter, the front half of 2023 has offered green shoots for optimistic bitcoin holders. Now the question for investors will be how long they can keep their coats off.

Taking a look at where we are now, BTC broke through $30,000 in early Asia trading hours and has been choppy through early U.S. trading.

Hourly volume implies conviction behind the move higher as it has largely surpassed its 20-day moving average. Daily volume appears poised to do the same.

The move to 10-month highs is significant, given crypto market turmoil since last May. The push effectively moves bitcoin to where it was prior to the implosions of Three Arrows Capital, Celsius Network and FTX, among others.

Where crypto is heading is a more exciting question at this point than where we have been, and reasonable explanations exist on both sides of the trade.

A bullish narrative is the Federal Open Market Committee (FOMC) will slow interest rate cuts later this year.

Each passing day, in fact, moves us closer to that event, with the current target rate of 4.75%-5% within range of a previously announced (but not concrete) target rate of 5%-5.25%.

Investor optimism will likely depend on Wednesday’s consumer price index report, with expectations that inflation rose 0.4% month over month. CPI falling by more than expected will likely generate rewards for bullish BTC investors.

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But there appears to be a bearish divergence between bitcoin’s price and its momentum, particularly if measuring since January. BTC has risen 45% since Jan. 14, but its 14-day Relative Strength Index has fallen 19%.

Bitcoin and RSI 04/11/23 (TradingView)

Given the contradiction of narratives, traders may ultimately turn to what is happening with BTC balances on exchanges.

An increased balance of BTC on exchanges can foreshadow price declines as traders position BTC to sell if needed. A decrease in balances can mean the opposite, with investors placing BTC into cold storage with the hope that it will rise.

There has been a slight increase of approximately 4,000 BTC on exchanges since March 31, representing $130 million in value. More notable than the increase is that this shift marked the end of a decreased balance that commenced March 19.

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Given the recent $30,000 milestone, what happens next with balances may provide clues how investors view this move.

Bitcoin on exchanges 04/11/23 (Glassnode)

Edited by James Rubin.

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