Bitcoin wrapped up an exceptionally strong 2024 (up 120% YoY) 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 trend exhaustion. The signal suggests that bitcoin will remain within the range, at least in the short term (about 2-6 weeks), while other risky assets (such as stocks) continue to pull back.
Important technical levels to watch out for for bitcoin:
The minor resistance is at the most recent high, around $108,000, above which lies “uncharted” territory. A breakout would be a bullish development, but the momentum does not seem strong enough at this point to generate a breakout.
Initial support is near $84.5K, defined by the Ichimoku cloud model, a trend-following model based on historical prices. The recent deterioration in our medium-term indicators increases the likelihood that a pullback will deepen further, with secondary support around $73.8K, reinforced by the rising 200-day (~40-week) moving average.
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Despite short- and medium-term bearish signals, the long-term outlook for Bitcoin remains bullish from a technical perspective following the post-November election breakout. The break to new highs marked the emergence from a multi-month downtrend channel, and it helped long-term momentum indicators such as the monthly moving average convergence/divergence (MACD) reaccelerate. So a correction for bitcoin in the first quarter should provide an opportunity to add exposure ahead of another surge in bitcoin later in 2025.
Ethereum: Resistance near $4,000 is a hurdle for early 2025
Like bitcoin, ether has issued an overbought “sell” signal, which comes after a rejection at a key resistance around $4,000. The ‘sell’ signal has medium-term implications and supports a correction phase in the next few months. Ether also has initial support at the daily Ichimoku cloud model, near $3226, above which it has stabilized. We expect that a correction in the first quarter will lead to an analysis and test of the 200-day (40-week) moving average. However, our long-term indicators are still pointing higher, albeit less convincingly, compared to bitcoin. A break above the $4000 level would likely result in improved long-term metrics such as the monthly MACD.
Bitcoin vs. Ether: Bitcoin Outperformance in 2024 Gives Way to Volatility
In 2024, bitcoin outperformed ether by 74%, a trend that is clearly visible in the bitcoin/ether ratio. Since early November, the relative performance between the two largest cryptocurrencies has become more erratic, evidenced by the wide trading range that has taken hold of the ratio.
During a crypto market correction, bitcoin normally outperforms ether as it is typically considered “safer.” However, it is likely that all cryptocurrencies trade lower in absolute terms when risky assets undergo a correction, noting that correlations tend to rise when markets fall. Nevertheless, the bullish long-term outlook suggests that first-quarter volatility could provide an opportunity to expand exposure with a more favorable risk/reward profile, ideally waiting for medium-term indicators to reemerge.