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The PUMPalooza: Why Bitcoin (BTC) Price is Going Up, or Has the Crypto Bull Market Finally Begun?

Bitcoin is up 16% in a week but are those gains sustainable? 

Following the 14.7% price drop in the last week of August, attributed to Elon Musk's SpaceX selling its bitcoin holdings, concerns over U.S. Federal Reserve interest rate hikes, rising government bond yields, and fears of a Chinese Yuan devaluation fueled the sell-off, Bitcoin (BTC) has been under severe selling pressure until the middle of October. A couple of explosive rallies to $28,000 had been vehemently rejected by the bears, keeping Boss Coin trading sideways until it broke through that enchanted resistance level. Since then, it has continued its upward momentum, pushing strongly like a nuclear-powered icebreaker, making a brief stop to offload the ‘passengers’ who didn’t believe that that ship could go further and chose to watch the penguins at $38,000 parallel.  

In defense of the passengers, BTC took a frustratingly long time, undergoing numerous tests and rejections, before finally breaking above $38,000. Following this breakthrough, the market witnessed a parabolic rally, pushing the price up by 17% to the delight of all Bitcoin maximalists. 

Naturally, the entire crypto space immediately buzzed with catchphrases like 'bull market,' '100K, here we go,' and various other expressions of wishful thinking. At the same time, those with a cool mind began pondering the cause of this, admittedly, remarkable rally, considering the preceding market conditions and questioning the sustainability of this price uptick.Therefore, let's cool down our heads and analyze, contemplating whether this price surge was a fluke or a real deal. First, here is our take on the possible fundamental reasons behind the price surge of Bitcoin. 

Binance’s settlement deal quelled market concerns    

Initially, Bitcoin's trajectory showed uncertainty following Binance's CEO CZ's guilty plea and the $4.3 billion settlement with the U.S. Department of Justice (DOJ) on November 21. Contrary to FTX's liquidity crisis, Binance didn't witness a mass fund exodus: while its Bitcoin reserves dipped 17% from their peak, they didn't reach a critical low and promptly started rebounding. Despite hitting their lowest point since March 15, Binance still boasts the largest BTC reserves among centralized exchanges. Binance's new CEO, Richard Teng, points out major changes in the company's approach, which could positively influence market sentiment and contribute to the recent BTC rally.

The anticipation of SEC’s Bitcoin ETF approval 

SEC approving spot Bitcoin ETFs is crucial for institutional involvement in crypto. In November, Grayscale and BlackRock, major players in crypto and Wall Street, respectively, met with the SEC about their Bitcoin ETF applications. Both firms made amendments via S-1 filings. BlackRock's second amendment to the June S-1 registration mentions Fedwire and SWIFT in the iShares Bitcoin Trust application. Despite delays, these actions suggest ongoing talks, fueling speculation that the SEC might be gearing up to approve a spot fund, contributing to Bitcoin's recent surge.

Institutional investors are pumping capital into BTC 

The majority of retail and mid-tier investors are anticipating increased liquidity with a Bitcoin spot ETF approval. Meanwhile, financial institutions have already started pouring money in Bitcoin and crypto. In the past year, institutional investors have put $1.76 billion into digital assets, with over $1.68 billion going to Bitcoin. In recent months alone, $132.8 million of institutional investment was dedicated to Bitcoin, enhancing market liquidity and contributing to the ongoing Bitcoin rally.  

New address momentum hits record high before Bitcoin rally, signaling strong network fundamentals

Source: Glassnode. Red line - monthly average of new addresses; blue line - yearly average

According to recent data from Glassnode, the New Address Momentum metric reveals a significant uptick, hitting an all-time high just before the onset of the recent Bitcoin price surge. This occurrence marks only the third time in the entire history of the network that such a spike has been recorded. The New Address Momentum is a key indicator reflecting the monthly average of newly created addresses, providing insights into on-chain activity. The surge in this metric indicates a notable expansion in on-chain transactions, reflecting improving network fundamentals and heightened network utilization. Such positive indicators often correlate with favorable price movements, emphasizing the growing health and vitality of the Bitcoin network as it continues to attract new participants and foster increased activity.

Why Bitcoin is rallying - chart analysis

We are going to examine where it led BTC in terms of price action on a weekly chart, the most appropriate timeframe for this type of analysis.

BTC/USDT 1-week timeframe with a Cup & Handle pattern

On this larger timeframe, it's evident that Bitcoin has entered a bullish phase after bottoming out near $15,000. Interestingly, the consolidation territory where BTC had been consolidating before the commencement of the uptrend is situated right near the top of the first major bull market of 2017. That should tell a lot about historic patterns in cryptocurrency trading to those who don't believe in them. 

From the standpoint of technical analysis, there are two reasons to consider that BTC is at the cusp of another bull market or, at the very least, has shrugged off months-long selling pressure. Firstly, when we examine the price action from May to July 2022 until now, a strong bullish pattern known as a "Cup & Handle" has formed and is now confirmed by the latest rally. The "Cup" has been sketched with an awkward blue line, though its character is evident.

The bullish bias of the "Cup & Handle" pattern is affirmed as the price surges following the completion of the "handle" — a dynamic clearly visible here. Furthermore, the 8-week-long rally propelled BTC out of the ascending channel and continued its upward trajectory after a brief consolidation at the channel's peak. This behavior is as bullish as it gets.

Where will this rally take Bitcoin? Let's employ the good old Fibonacci retracement tool to try and figure that out. It doesn't take a magnifying glass to see that the 6.18% or "compression" zone lies precisely between $48,000 and $50,000. BTC will eventually head in that direction, as it corresponds to a major liquidity zone. However, before reaching that point, we might witness a correction down to $40,000 and a re-test of the channel's top.

Conclusion: Bitcoin price is up as a part of its long-term uptrend that gaining sustainability

The recent surge in Bitcoin's price aligns with a long-term uptrend, supported by both strong technical signals and solid fundamentals. While technical analyses show a robust foundation for the rally, the uncertainty around Bitcoin ETF approvals introduces caution, potentially triggering a significant correction.

Bitcoin has historically been the primary driver of bull markets, and the current Altseason metric, though at an average of 43 as of the time of writing, indicates that altcoins have not surpassed Bitcoin yet. Despite this, the overall impact on the crypto market remains positive. The Altseason metric, though not at its peak, still highlights Bitcoin's positive influence on the broader crypto ecosystem, suggesting potential opportunities for altcoins to put up even more gains as market dynamics evolve.

All in all, the recent Bitcoin rally reflects both technical strength and fundamental factors, signaling a broader positive trend. While challenges like ETF approvals may bring volatility, Bitcoin's enduring role as a market leader suggests resilience. The Altseason metric, though not at its highest, underscores Bitcoin's crucial role as an icebreaker, clearing the path for the rest of the market through the remnants of the crypto winter.