How high can bitcoin rise in 2023?

How high can bitcoin rise in 2023?

Bitcoin started to rise sharply from around $16,500, reaching a peak of $24,252, an increase of about 47% within a month. So, is Bitcoin's bottom confirmed? How will the market outlook develop in 2023? This article will focus on these issues, mainly from the perspective of the bitcoin bull-bear cycle and other dimensions.

The bottom of the Bitcoin cycle has been confirmed

Statistically, Bitcoin has historically bottomed out 477 days before halving. If history repeats, Bitcoin's price will bottom out on December 30, 2022, and Bitcoin's on-chain data confirms this cycle script. After the DCG panic, the market did rise sharply, and the bottom shape was confirmed. To further clarify the conclusion, this article selects five indicators of Glassnode for further observation. It uses them to show our current cycle position to further explore the subsequent market development from the perspective of the Bitcoin cycle.

Indicator 1: Competitive fee market

One sign of growing demand on the network is the healthy increase in revenue fees from Bitcoin miners. This is a result of blocks becoming congested and fees rising. 

Indicator 2: Strong bear market bottom

Due to the massive reallocation of supply at bear market lows, the percentage of supply held by new buyers tends to be very price sensitive compared to long-term holders. Therefore, when supply exceeds long-term holders as a percentage of profits, it usually means that a large-scale supply reallocation has occurred in recent months.

Indicator 3: The relatively price-insensitive holder base has been saturated when the correlation between price and profit supply percentage deviates below 0.75.

Indicator 4: When the cost basis of the spending entity is higher than that of the holding entity, we can conclude that most new investors tend to hold and therefore have more confidence in the continued upside. While not entirely untriggered now, confidence in the trend is approaching a positive breakout.

Generally speaking, from the indicators of Glassnode, there are indeed reasons to believe that the bottom of the encryption market has been confirmed, the market has begun to recover, confidence in the trend is increasing, and positive signals have begun to form; however, the current bull market trend in the encryption market has not yet formed. After experiencing a series of institutional deleveraging, such as the FTX thunderstorm and the DCG crisis, the current encryption market is more of a big rebound after the deep bear. The market still needs to build a bottom further.

It can be seen from the analysis that the current bottom of the encryption market can be confirmed, and this rise is more considered to be a rebound rather than a trend reversal. The most significant difference in the market is whether this big rebound has peaked. Judging from the recent performance of Bitcoin, many analysts seem to have underestimated the institutions' determination and the macro market's impact.

Judging from the subsequent market performance, after the short-term consolidation of the encryption market, Bitcoin continued to lead the rise. The encryption market has not entered the consolidation stage, and many analysts' predictions have deviated. This article also believes the market has not experienced a trend reversal, but the difference lies in the core force driving this rebound round. Roughly two forces are driving the market rebound: one is the promotion of stock funds. In the case of an oversold rebound, speculative funds buy and then sell at high prices. The other kind of rebound is that incremental capital enters to promote the rebound of Bitcoin, which drives the encryption market up. Since the Bitcoin futures ETF launch, Bitcoin has become an investment target that institutions are keen on. This round of bitcoin rises, and there are also many signs showing the entry of institutions. Unlike speculative funds, institutional funds tend to hold large positions and hold positions for a long time, which is different from speculative funds. This is the core reason why most analysts have analytical fallacies.

When will the big trend come?

The big bull market in the encryption market will still be driven by Bitcoin's internal halving cycle and the macro market. On February 2, the Federal Reserve raised interest rates by 25 basis points, and Bitcoin rose sharply again, verifying the linkage between the macro market and Bitcoin to some extent.

In the long run, the Federal Reserve's current round of interest rate cut cycle may coincide with Bitcoin's halving cycle. The Goldman Sachs analysis team, led by Jan Hatzius, sees the Fed projecting one rate hike in 2023 and then keeping rates from 4.25% to 4.50% until 2024. Subsequently, the Fed is expected to cut rates once in 2024.

From a cyclical perspective, Bitcoin's next halving is expected to occur on April 20, 2024, and the average duration from halving to the peak of the next bull market cycle is 480 days. If history repeats itself, calculated according to the data model of Plan B, Bitcoin will rise to $36,000 before the next halving and then rise to $149,000.