Short-Term Overbought, But Strong Inflows Support Higher Bitcoin Prices

Following a seven-month consolidation period, we identified the catalyst as a new Bitcoin range expansion. A surprisingly strong inflow from Bitcoin Spot ETFs has also emerged, accelerating after Fed Chair Powell assured markets of an extended rate-cutting cycle, marked by the mid-September 50-basis-point rate cut.

Bitcoin’s momentum is expected to stay strong through December, driven by rising prices and increased media attention, which could attract new investors. Optimism also surrounds Trump’s January 20, 2025, inauguration, which could usher in a more crypto-friendly regulatory environment, including a new SEC Chair. Additionally, the anticipated announcement of a $16.5 billion FTX distribution will likely support sentiment. These factors create a favorable backdrop for sustained bullish sentiment and Bitcoin price stability.

We see several catalysts that could drive Bitcoin to new highs this quarter, highlighted by three major developments in U.S. regulatory changes. First, on December 6, S&P Global may announce MicroStrategy’s addition to the S&P 500, which would prompt index funds to buy shares. Second, on December 10, Microsoft will review a proposal to invest in Bitcoin despite board opposition.

Linked to Project 2025, the proposal submitted by the National Center for Public Policy Research suggests evaluating Bitcoin as an investment. Finally, starting after December 15, 2024, the FASB will introduce new rules allowing companies to report crypto at fair market value, encouraging treasuries to add Bitcoin to balance sheets.

Historically, when Bitcoin’s relative strength index (RSI) reaches overbought levels, or the 30-day rolling return exceeds +40%, prices tend to consolidate as momentum cools. While Matrix on Target is not adopting a bearish stance, a brief consolidation phase may be likely given recent overbought conditions. However, numerous positive catalysts remain on the horizon.

Another perspective on Bitcoin’s current momentum is to examine the 7-day rolling increase in price on a U.S. dollar basis. Naturally, as Bitcoin’s price rises, the absolute differences between prices grow, but the latest 7-day increase of $19,265 marks an all-time high, highlighting the unprecedented strength of this rally.

Disclaimer: The above content is for informational purposes and reference only. The content does not constitute investment advice. Digital asset transactions can be precarious and volatile. Investment decisions should be made after carefully considering individual circumstances and consulting financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this content.

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