Charles Edwards, founder of digital asset and bitcoin hedge fund Capriole Investments, published a detailed examination of the current phase of the bitcoin market that suggests an upward trajectory, potentially reaching the $100,000 mark. The analysis depends on the identification of a Wyckoff 'Sign of Strength' (SOS), a concept derived from the century-old Wyckoff Method that studies the dynamics of supply and demand to forecast price movements.
Understanding Wyckoff's 'SOS': bitcoin at $100,000?
The Wyckoff method, developed by Richard D. Wyckoff, is a framework for understanding market structures and predicting future price movements by analyzing price action, volume, and time. The 'Sign of Strength' (SOS) within this methodology means a point at which the market shows evidence of demand dominating supply, indicating a strong bullish outlook.
Edwards' observation of an SOS pattern in bitcoin's recent price movements suggests that the market is at a crucial point, where sustained bullish momentum is very likely to hold. In the latest from Capriole NewsletterEdwards offered an accurate overview of bitcoin market behavior, highlighting a period of volatility and consolidation in the $60,000 to $70,000 range.
This phase was anticipated by the hedge fund. Currently, as bitcoin ventures above its last cycle's all-time highs, it is aligning with the expected zigzag SOS structure. Edwards clarifies: “It would not be surprising to see a liquidity grab at all-time highs (…) Any consolidation above the monthly level of $56,000 is extremely bullish. “It would be unusual (but not impossible) for the price to continue in a straight line.”
The “zig-zag” phase also aligns perfectly with the halving cycle, as btc tends to consolidate “both months on either side of the halving.” Edwards added that “the reality of a much lower supply growth rate + unlocked pent-up trading demand will kick in and launch 12 months of the historically best risk-reward period for bitcoin.”
From a technical perspective, bitcoin's foray into price discovery territory above $70,000 lacks significant resistance levels. This opens a path towards psychological and Fibonacci extension levels, with Edwards pointing to $100,000 as the next major psychological resistance.
The 1.618 Fibonacci extension from the 2021 high to the 2022 low sits at $101,750, serving as a technical marker for possible resistance. Edwards reflects on investor sentiment, stating, “You can also imagine that quite a few investors would be happy to see bitcoin hit six figures and make profits in that zone,” acknowledging the psychological impact of such milestones.
btc Fundamentals Support Bull Case
Edwards also delves into the importance of fundamentals, underscoring their role in providing a bullish backdrop for bitcoin. The introduction of the Dynamic Range NVT (DRNVT), a Capriole-exclusive metric, indicates that bitcoin is currently undervalued. Edwards describes DRNVT as “bitcoin's 'PE ratio',” which assesses the value of the network by comparing the performance of on-chain transactions to market capitalization.
Current DRNVT readings suggest an attractive investment opportunity, given bitcoin's undervaluation at its all-time highs. “The fascinating thing at this point in the cycle is that DRNVT is currently in a zone of value. With the price at all-time highs, this is a promising and unusual reading for the opportunity ahead in 2024. It is something we did not see in 2016 or 2020,” Edwards commented.
With both technical indicators and fundamental analysis pointing to a bullish future for bitcoin, anticipation around the upcoming Halving event adds further momentum to the positive outlook. Despite expectations of near-term volatility and consolidation, Edwards confidently states that “the odds are starting to tip to the upside once again.”
At the time of this publication, btc was trading at $69,981.
Featured image from Shutterstock, chart from TradingView.com
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