Bitcoin Rises 130%: Will it Continue to Rise?

Outside of the US tech sector, stock market returns have been very ordinary this year, with investors looking elsewhere for returns, particularly Bitcoin, causing it to rise. So, is the rise of Bitcoin sustainable, or is it just a temporary shift in the hope of some capital gains?

What has caused Bitcoin to surge?

After falling around 78 per cent from its all-time high in November last year, Bitcoin is rising again. In the previous twelve months, the price has risen over 130 per cent and seems to be on an ever-increasing bullish run. This is not unusual for a speculative investment as the higher it moves up, the more investors want to gain exposure.

However, I would caution anyone experiencing FOMO as Bitcoin has hit some key resistance levels around $34,000 to $36,000, which means it could reverse sharply. It’s common for most investors to move into an investment near its top, unaware of the impending risk. That said, it does have the potential to trade higher, at least in the short term. If Bitcoin breaks through these resistance levels, it could continue to rise as high as $41,000 to $43,000 before hitting another key resistance level.

One recent event that has caused Bitcoin to surge is Black Rock’s application in June of this year to operate a Bitcoin ETF. Initially, the news barely dinted the price of Bitcoin as there have been multiple Spot ETF applications denied by the SEC in the past. But last week, traders saw Black Rock’s Bitcoin ETF ticker symbol on the Depository Trust & Clearing Corporation’s (DTCC) website, which investors took as a certainty that the ETF would be approved.

Consequently, Bitcoin has risen over 30 per cent in the last two weeks even though the DTCC hasn’t approved the investment as yet. Bitcoin still faces many challenges with regulatory pushback from the SEC, other world regulators and the reliance on investors who don’t seem to have a big appetite for risk in this current economic environment.

There is also negative market sentiment from the recent collapse of certain cryptocurrency exchanges and lawsuits facing existing exchanges such as Coinbase. While I don’t believe Bitcoin has any tangible value, I am interested in the pattern unfolding right now. As a trader, it is very easy to pick its movements, and I expect that around February 2024, it is highly likely it will fall into its next low, which means it is searching for its next high right now.

Remember, Bitcoin is only worth what someone else is willing to pay for it, so while I don’t deny there’s money to be made from the rampant speculation, it does come with higher risks.

What were the best and worst-performing sectors last week?

The best-performing sectors included Real Estate, up 6.68 per cent, followed by Information Technology, up 4.51 per cent and Healthcare, up 4.30 per cent. The worst-performing sectors included Utilities, down 4.63 per cent, followed by Energy, down 3.50 per cent and Consumer Staples, down 0.12 per cent.

The best-performing stocks in the ASX top 100 included Block, up 21.11 per cent, followed by Charter Hall Group, up 11.66 per cent and Goodman Group, up 9.16 per cent. The worst-performing stocks included Treasury Wines Estates, down 9.66 per cent, followed by IGO and Origin Energy, as both are down 9.01 per cent.

What's next for the Australian stock market?

I’ve said it before, but a week can be a long time in the stock market. In my prior report, things looked bearish, and I indicated that we needed to be prepared for more downside to below 6,800 points and possibly lower. However, last week, the Australian market turned around and has been quite strong, up 2.29 per cent. I also mentioned in my previous report while I may be overly bullish, I still believe the end of the move-down is very close.

We can’t confirm the market is bullish, as one week up does not mean a new bull market is unfolding, nor does one week down confirm a bear market. Last week could be just another short rise before the market falls away again, so I would caution investors to remain patient and wait for confirmation that the move-down has ceased.

Right now, I need to assume that because the market is technically bearish, it will continue until it proves otherwise. Given this, the next level of support is 6,800 points, then around 6,600 points, with very strong support at around 6,200 points.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.