Bitcoin: A Repeat of 2023's 130% Surge or a Fundamentally New Path?

A signal that appeared earlier this week in the Bitcoin (BTC) markets, reminds us of a similar indication from 2023, preceding an impressive 130% price increase in 2024. This raises the question of whether the price is once again on the verge of a bullish inflection point. At the same time, changes in liquidity, ETF flows, and macroeconomic data point to a fundamentally different environment than two years ago, suggesting that the path forward may not follow the path of the previous cycle.

According to data aggregator Swissblock, Bitcoin has now spent 25 consecutive days in the "extremely high risk" zone, the longest period on record, surpassing the previous peak of 23 days in 2023. Historically, a prolonged stay in this zone often coincides with a late-phase drawdown or a bottom signal. Michaël van de Poppe, founder of MN Capital, also pointed to the interaction between BTC and the profit/loss index, which shows the price was now trading at levels that previously marked bottoming phases. In 2023, the shift from high risk to low risk coincided with the start of a powerful bullish expansion.

However, traders' current positioning doesn't seem to be consistent with an upward trend. RugaResearch reported that demand over a 30-day period continues to fluctuate between positive and negative. Although selling pressure is easing, sustained buying demand hasn't yet been sustained.

Ecoinometrics, a macroeconomic newsletter platform, emphasizes that BTC declines of this magnitude rarely resolve quickly. The exception is the COVID-19 rally in 2020, which was supported by aggressive monetary policy. Recoveries after 50% drawdowns have typically developed over a longer period. ETF flow data reinforces the cautious tone: since August, cumulative inflows into gold ETFs have exceeded spot Bitcoin ETF flows on a rolling 90-day basis. During the same period, Bitcoin funds experienced negative inflows, with an average loss of as much as $2,06 billion on a 90-day basis.

Moreover, inflation trends provide further context. The headline adjustment in Personal Consumption Expenditures (PCE) is currently around 2,9% year-on-year, with core inflation near 3,0% and core services above 3,4%. The Federal Reserve is targeting PCE, and recent trends do not point to a clear downward shift. Without an easing of expectations, liquidity expansion will remain limited.

Regarding price levels, Willy Woo, Managing Partner at CMCC Crest, observed that any short-term recovery move towards $70.000-$80.000 is likely to be followed by renewed selling pressure, as "the broader regime is strongly bearish, with both spot and futures liquidity diminishing." He argues that the $45.000 level is consistent with the previous bear market. Below that, $30.000 and $16.000 are important historical support levels that collectively support the maintenance of the long-term trend.

Frequently Asked Questions

What does this bottom signal mean for Bitcoin investors?
The bottom signal may indicate a potential price increase, but investors should anticipate a more volatile environment than in previous cycles. It's essential to closely monitor indicators and liquidity flows before making any investment decisions.

How do ETF flows impact the market?
The negative inflows into Bitcoin ETFs and the strong inflows into gold ETFs point to broader resistance to investing in Bitcoin. This could increase price pressure in the short term, which could be an important signal for investors to reconsider their positions.

Can macroeconomic factors influence Bitcoin's price?
Certainly, macroeconomic indicators like inflation and the Federal Reserve's response to it are crucial for Bitcoin's future. Current trends suggest that investors should exercise caution, as persistently high inflation could reduce liquidity and further pressure the market.