Bitcoin completed an exceptionally strong 2024 (up 120% year-over-year) with a whimper, recording the first overbought “sell” signal on its weekly bar chart since mid-April according to the Stochastic Oscillator, which is an indicator of exhaustion. the trend. The signal suggests that Bitcoin will remain range-bound, at least in the short term (approximately 2-6 weeks), as other risk assets (e.g. stocks) continue to pull back.
Key technical levels to watch for bitcoin:
- Minor resistance lies at the most recent high near $108,000, above which lies “unexplored” territory. A breakout would be a bullish advance, but the momentum does not seem strong enough to generate a breakout at this time.
- Initial support is near $84.5K, defined by the Ichimoku cloud model, which is a trend-following model based on historical prices. The recent deterioration in our medium-term indicators increases the chances of a pullback deepening further, with secondary support near $73,800, reinforced by the rising 200-day moving average (~40 weeks).
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Despite bearish signs in the short and medium term, the long-term outlook for bitcoin remains bullish from a technical perspective following the post-election breakout in November. The breakout to new highs marked the emergence of a multi-month downtrend channel and helped long-term momentum indicators such as the monthly moving average convergence/divergence (MACD) reaccelerate. Therefore, a correction for bitcoin in the first quarter should present an opportunity to add exposure ahead of another bitcoin rally later in 2025.
Ethereum: resistance near $4000 is a hurdle for early 2025
Like bitcoin, ether has shown an overbought “sell” signal, which comes after a rejection at major resistance near $4,000. The “sell” signal has medium-term implications and supports a corrective phase over the coming months. Ether also has initial support at the daily Ichimoku cloud pattern, near $3,226, above which it has stabilized. We expect a correction in the first quarter to cause a breakout and test of the 200-day (40-week) moving average. However, our long-term indicators still point higher, albeit less convincingly, compared to bitcoin. A break above the $4000 level would likely result in better long-term metrics like the monthly MACD.
Bitcoin vs ether: bitcoin outperformance in 2024 gives way to volatility
In 2024, bitcoin will outperform ether by 74%, a trend that can be clearly seen in the bitcoin/ether ratio. Since early November, relative performance has become more fickle between the two largest cryptocurrencies, as evidenced by the wide trading range that has taken over the relationship.
During a cryptocurrency market correction, bitcoin typically outperforms ether as it is generally considered “safer.” However, all cryptocurrencies are likely to trade lower in absolute terms when risk assets are undergoing a correction, considering that correlations tend to rise when markets are down. However, a long-term bullish outlook suggests that Q1 volatility may present an opportunity to add exposure with a more favorable risk/reward profile, ideally waiting for medium-term indicators to rise again.
