After several attempts to breach $90k to the upside, BTC finally made a new ATH, albeit only momentarily, at $93,400 heading into the close of trading on November 13. As we correctly noted yesterday, a consolidation or correction did indeed break out, as the crypto market shows signs of overheating and has visibly reached overbought territory. Ethereum also took a hit, off $46.67 or 1.40% to $3,281.67, the steepest drop since November 4, when it fell 3.87%. In addition, the downturn in ETH capped a seven-day winning streak. Longer term, ETH is up 30.32% on the month and 43.75% YTD.
This downshift tracked a pullback in US equity benchmarks, with the DJIA shedding 0.86% to 43, 910.98, the S&P 500 dipping 0.29% to 5,984.99, and the Nasdaq finishing fractionally lower. A breather in the post-election rally was bound to set in sooner or later. The BTC market remains highly sensitive to and correlated with stock market liquidity, so the length and depth of a consolidation or correction is now top of mind for crypto market participants.
That said, while the bull run may be off the table for the next few days or weeks, the fundamentals driving the current rally show that there is considerably more room to run. BTC investors are embracing Trump’s vision for the cryptocurrency industry, which, in turn, reflects his MAGA platform.
The core components of Trump’s crypto ideology are set forth in the Strategic Bitcoin Reserve Bill, recently introduced by US Senator Cnythia Lummis and a topic raised by Trump while on the campaign trail at the Bitcoin 2024 Conference in Nashville Tennessee, from July 24 to 27. For those who have not yet had the chance to do so, we advise listening to this speech, which can be found on YT at Trump's Full Speech at Bitcoin 2024 Conference.
In a nutshell, Lummis proposes acquiring 1 mln Bitcoins over a period of five years, with the aim of cutting the massive $26 trln US debt in half by 2045.
Thus, when Trump is inaugurated on January 20, within 100 days, Congress will presumably pass the Strategic Bitcoin Bill whereby action will be taken to start buying up to 5% of the total BTC supply and placing it in a state reserve. The plan is to eventually use it to pay off the national deficit in 20 years (by 2045). The cumulative reserve is seen as being worth trillions by that time. However, the deficit is rising so quickly it could reach $200 trln by that time, so the question is whether BTC will be able to rise fast enough to catch up with the snowballing national debt. However, if the US government sets a schedule to buy up a certain amount of BTCs every month, (much the same way that China and Russia have done in their monthly or periodic gold and silver quotas) that would trigger considerable buying pressure above and beyond ETF and retail pressure. In our view, such a scenario would be explosive for the BTC price, potentially even touching off an international price war perhaps on the part of Russia and China, who might not be willing to see the US snapping up 5% of total supply. We think this approach could cause various rival nations to up the ante, as they might decide to outdo the US, buying say 7-10% of the supply as a preemptive move in the ‘war of BTC accumulation’. Blackrock and other international heavyweights might also decide to join the fray. If this scenario were actually to unfold, it would drive the BTC price into the millions. The point is that with the total supply of Bitcoin fixed at 21 mln, under the Bitcoin Protocol, there would simply not be enough to go around as demand would vastly outpace supply. We also note that Lummis confirmed on social media after Trump’s victory on November 5 that this plan is on track and in the pipeline.
Technical analysis
BTC has consistently faced pushback from the formidable $90k resistance level. This corresponds to the key 1. 618 Fibonacci extension, a signal that implies the potential for a decline to the 1.272 Fibonacci level at $80,300. A deeper correction could also shape up, with the possibility for a retracement to the previous ATH near $74k. The Fibonacci sequence is a highly accurate predictor of future price trends, so traders should be on the lookout for heightened volatility as many participants might opt for profit-taking over the next few sessions. The next key resistance point is near $92,183, while support levels lie at $88,046, $79,622 and then $74K.