Is Now A Good Time To Invest In Bitcoin?
Bitcoin price has increased by 70% since the beginning of the year. Crypto enthusiasts are now wondering if Bitcoin will rise further. I want to address this issue from multiple perspectives.
Today, the Fed will announce its March rate decision. The anxiety created by the four banks in the USA will probably affect this decision. The baseline scenario for today is an interest rate increase of 25 basis points. Since the adverse effects of rising interest rates are felt, we can expect that the FED will soften its rhetoric. US opinion leaders are putting pressure on the FED in this direction. For example, Elon Musk stated that the FED should cut interest rates by 50 basis points. Elon Musk has been adapting to the bear market since May last year. Therefore, he is a businessman who can accurately determine the actual situation in the market. The Nomura analyst also forecasted a rate cut in the past few days. It is necessary to bend it in reverse to straighten the iron. I take the rate cut expectations as a call for the FED to soften its policy.
While interpreting the macroeconomic situation, focusing on facts rather than discourses would be the correct attitude. There has been talking of rigidity in US inflation for several months. In the chart below, we see a clear downtrend. Daily Truflation data shows that US consumer inflation has dropped as low as 4% as of yesterday. The Fed is probably aware of this.
I expect that after today's possible 25 base point rate increase, the FED will keep interest rates constant for a long time. So after months, the FED will finally get out of the equation, and the crypto market will start to act according to its dynamics.
Long-Term Bitcoin Price Trend
Investors interested in the crypto market must know the exponential Bitcoin price trend. The model that best explains the Bitcoin price mathematically is below.
According to the model, despite the 70% increase in Bitcoin price since the beginning of the year, we are at the "Fire Sale!" level. The moderate Bitcoin price level is shown in the yellow zone of the rainbow. Since Bitcoin's reasonable price range is between 70k and 100k, there is still a long way to go. However, to reach these levels, macroeconomic conditions must at least be neutral, and market psychology must be positive.
Bitcoin Fear & Greed Index
Bitcoin Fear and greed index is a tool developed to measure the mood in the market. Effective parameters are listed below:
Volatility 25%, market momentum/volume 25%, social media 15%, surveys 15%, Bitcoin dominance 10%, and Google trends 10%.
Volatility is seen as a sign of fear in the market. The rise of Bitcoin dominance is also considered a sign of concern. Other factors are considered as an expression of interest in Bitcoin.
Bitcoin Fear & Greed index is produced to detect situations where psychology is at extremes. It is assumed that excessive fear and greed lead investors to make wrong decisions. Therefore, according to the index, investors are advised to buy in times of extreme anxiety and sell in times of excessive enthusiasm.
In the first quarter of 2021, the Fear&Greed index had dropped to low levels. Those who sold out of extreme fear were largely protected from the bear market's losses. So fear sometimes leads us to make the right decisions. The index reached 62 yesterday and shows crypto investors' increasing self-confidence.
On December 4, 2021, Bitcoin price dropped from 53k to 42k. Later, the price recovered and closed the day at 48k. On that day, Bitcoin fell below its 200-day simple average. On December 23, the Bitcoin price climbed above its 200-day average but fell below average a week later. The same event was repeated from March 27 to April 6, 2022. Thus, it was confirmed that the bear market was entered.
Bitcoin price broke above its 200-day average on January 14, 2023, and is still above its 200-day average. Bitcoin is also above its 10, 20, 50, and 100-day averages. The same is true for the 4-hour and weekly charts. The moving averages are giving a strong buy signal for Bitcoin.
Along with the 200-day average, the weekly RSI value also helps us understand the primary trend. A weekly RSI value above 50 indicates an uptrend. The weekly RSI value dropped below 50 on December 6, 2021. It remained below 50 throughout 2022 and rose above 50 on January 9, 2023. It has been over 50 since then.
The daily chart below shows that Bitcoin has a positive outlook regarding momentum indicators. The RSI is at the border of the overbought zone, while the MACD is in the positive territory.
There is a similarly positive outlook on the weekly chart. Meanwhile, last week Bitcoin climbed above its 200-week average. 200-week average also shows that the primary trend is up for Bitcoin.
It is also possible to find data indicating that Bitcoin will fall. For example, on the 4-hour chart, the MACD is producing a negative signal. Hence, technical analysis indicators generally produce signals in the direction of buying. There may be decreases when the primary trend is upward, but these decreases can be expected to remain as exceptions.
If the FED ends interest rate hikes and thus the crypto market starts to act according to its dynamics, the buying in Bitcoin will continue. The 29k-30k USD band stands as a significant resistance level. If this level is passed, a journey toward 40k can begin.
Although I expect the rise to continue, I sold some of the Bitcoins I bought last quarter. It's good to be optimistic and cautious.
Thank you for reading.
P.S. I am not an investment advisor. Please do your own research.
Cover Image Source: Midjourney App
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