Bitcoin rounded out a very strong 2024 (up 120% yoy) with a rumble, logging the first overbought “sell” signal on its weekly bar chart since mid-April according to stochastic oscillator, which is an indicator of trend exhaustion. The signal suggests that bitcoin will remain range-bound, at least in the short term (approximately 2-6 weeks), while other risk assets (e.g., equities) continue to bounce back.
Key technical levels to watch for bitcoin:
- Minor resistance is at the latest high, near $108K, above which is “uncharted” territory. A breakout is a bullish development, but the momentum does not seem strong enough to produce 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 weakness in our intermediate-term indicators increases the chances that a pullback will deepen, with secondary support near $73.8K, bolstered by the rising 200-day (~40-week) moving average.
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Despite short- and intermediate-term bearish signals, 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 from a several-month downtrend channel, and it helped long-term momentum indicators such as the monthly moving average convergence/divergence (MACD) to accelerate again. Thus, the correction for bitcoin in Q1 should present an opportunity to add exposure before another upleg in bitcoin later in 2025.
Ethereum: resistance near $4000 is a barrier for early 2025
Like bitcoin, ether flashed an overbought “sell” signal, which came after rejecting key resistance near $4000. The “sell” signal has intermediate-term implications, supporting a correction phase in the next two months. Ether also has initial support in the daily Ichimoku cloud pattern, near $3226, where it has stabilized. We expect the correction in Q1 to lead to a breakdown 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 breakout above the $4000 level is likely to result in improved long-term metrics such as the monthly MACD.
Bitcoin vs. ether: Bitcoin’s 2024 outperformance gives way to volatility
By 2024, bitcoin will surpass ether by 74%, a trend that can be clearly seen in the bitcoin/ether ratio. Since early November, the relative performance has been more volatile between the two largest cryptocurrencies, as evidenced by the wide trading range that has held the ratio.
During corrections in the crypto market, bitcoin usually outperforms ether because it is generally considered “safer.” However, all cryptocurrencies tend to trade lower in absolute terms when risk assets undergo a correction, noting that correlations tend to increase when markets decline. However, a bullish long-term outlook suggests that Q1 volatility may present an opportunity to add exposure with a more favorable risk/reward profile, ideally waiting for intermediate-term indicators to emerge again .
