Bitcoin Rises to 5-Month High, What Next Levels to Watch?

October was an exciting month for the bulls as Bitcoin continues to push above multiple key resistance levels. The first week of the month is not complete, and BTC has already reached a one-week high of $55.4K and just entered the critical $55K-$58K resistance area. Since its bottom at $40.7K, Bitcoin has managed to rally more than 36% to its highest levels of the day.

During the weeks of risk aversion, Bitcoin managed to hold the deepest high at $40.7K, which we covered and started forming sub-wave 3 to the upside.

BTC continued to outperform stocks even with risk aversion, managing to recover key resistance levels and print higher tops. It also managed to push above the major downtrend line around $50.8K, with a successful test of back support before rising to $55.4K. Consolidation above the downtrend line and bullish follow-up is likely to prove a strong breach.

Third largest whale transfers 3,000 BTC to Coinbase

The pace of BTC rally is getting even faster as the third largest BTC whale transferred 3,000 BTC to Coinbase yesterday. The whale entity bought 15,227 bitcoins between $50K and $58.2K earlier this year, roughly 12% of the total bitcoin position. Although this is not a large percentage of the total holdings, we can expect the entity to distribute, especially if BTC starts testing $55K to $58K, which is a major technical resistance area and on the chain.

The Pisces entity could potentially break even or make a small profit of between $50K and $58K, potentially reducing risk and rebalancing. It is important that the bulls continue to intervene to suck the supply from this entity along with the other remaining sellers who bought BTC between $50K and $58K. Once the supply is completely absorbed, the uptrend in the chain strongly suggests that Bitcoin is likely to move higher and possibly reach new all-time highs.

Wyckoff buildup potentially completing phase D

Wyckoff accumulation continues to maintain a larger structure and recently formed a lower BU/LPS or higher at $39.6K before BTC surged to $55.4K, indicating a possible completion of Phase D. Failed attempt to break above $50K as open interest and leverage were exceeded.

BTC bulls sheltered $40K, a critical level of technical support and on-chain as larger buyers intervened as sentiment turned sharply lower. Since then, BTC has managed to rise above $52.9K, the key level to end Phase D and start Phase E Mark-Up. Ideally, the weekly close should end above $52.9K with a follow-up above Phase D.

Caution in the short term after a significant increase

In the near term, BTC has reached overbought levels on the 4-hour chart, spot reserves have slowly increased for three days, and the whale has moved higher, while the third largest BTC address has moved 3000 BTC to Coinbase. This indicates near-term caution as Bitcoin has seen a strong rally in just one week. Ideally, it would be nice to see the price consolidate with a slight pullback while still creating $50K as support.

Although the 4 hour chart may look cautious, the medium to long term trend in fundamental and sequential analysis remains strongly bullish and has a greater impact on price action looking at the next few months.

The trend on the chain is still strongly bullish

On-chain metrics continue to show companies generally accumulating long-term holders and miners, which are the most important groups because they hold the largest proportion of the total bitcoin supply. Although spot exchange reserves have been slowly trending higher for 3 days, there is no major trend of strong distribution from long-term coin holders and miners. We will have to keep a close eye on the on-chain metrics as BTC continues to attempt to break above $52.9K.

The critical week for the breakout from $55,000 to $58,000

Price action this week will be crucial in validating the bear trap from $52.9K to $39.6K. So far, BTC managed to close above $45.2K, which led to an even higher rally. More importantly, we need to see it achieve a strong weekly close above the September 7, 2021 highs at $52.9K and continue higher to fully validate the bear trap.

Today’s rally looks very bullish so far, but it’s still early, and we need to wait for price confirmation. Bitcoin’s performance relative to other risky assets has been very impressive considering risk aversion. Over the past week, the bulls firmly regained control, managing to keep the $40 low in a challenging environment while significantly outperforming.

If the momentum continues and BTC succeeds in establishing $50K as support, the probability of entering the key resistance zone between $55,000-$58K will continue to increase. If the $58K recovers, the bulls will start looking at the previous all-time highs of $64.8K, which has a very low technical volume and on the chain which indicates a path to new all-time highs may be possible.