CoinWorld.com reports:
Bitcoin is about to make a breakthrough. Caleb Franzen, the founder of Cubic Analytics, pointed out that key data indicates that Bitcoin is about to take significant steps.
Franzen’s research delved into the price trends dating back to November 2022. He used the 120-day Williams %R oscillator to track the price movements of Bitcoin. This indicator is reliable in showing the direction of Bitcoin’s development.
In the past, when this oscillator transitioned from the oversold zone to the overbought zone, the price of Bitcoin soared. This happened in January 2023 when Bitcoin surged 48% in three months.
In October 2023, the same situation occurred again, and Bitcoin rose 123% in just six months. According to Franzen, these signals have strong returns.
Since January 14, 2023, Bitcoin has risen by 226.8%, and since October 23, 2023, it has risen by 106.9%. Investors are now closely watching the trading price of Bitcoin reaching its highest level since July 2024.
Bitcoin is rising, and so are stocks. Franzen pointed out that the stock market is at a historical high, and participation in the entire market is increasing.
From value stocks to homebuilding stocks, brokerage stocks, aerospace and defense stocks, various ETFs have reached their highest weekly closing prices ever.
According to Franzen, as of last weekend, 33 different ETFs hit all-time highs. He also highlighted the performance of MicroStrategy (MSTR).
The index hit a new high and has risen by 241.76% year-to-date. Anyone who purchased MSTR at the end of 2023 would have seen their investment grow 3.4 times.
However, there is disagreement among investors. Some believe that due to market prosperity, MSTR may continue to rise, while others believe that the stock is disconnected from its fundamentals.
Regardless, MSTR is still on the rise, and REX Shares’ leveraged ETF provides investors with a way to gain more exposure.
Franzen stated that the broader macroeconomic environment has also been calm. The most important data point is the Atlanta Federal Reserve’s GDPNow estimate for the third quarter of 2024.
It has been revised to an annualized growth rate of +3.4%, which would mark an acceleration in economic activity compared to the first and second quarters of 2024. Currently, the market continues to rise, and investors are wondering when the next economic recession will occur.
Bitcoin’s relative performance
There has been much discussion about Bitcoin’s performance compared to stocks. For several months, Bitcoin has lagged behind the stock market, failing to keep up with the overall market pace.
Nevertheless, Bitcoin has risen by 61.6% year-to-date, far ahead of the Nasdaq 100 index, which has risen by 20.7% this year. Most of the gains came from the first quarter of this year.
Franzen compared Bitcoin’s relative performance to an equally weighted S&P 500. Relatively speaking, Bitcoin has failed to break the all-time high of the equally weighted index since 2021.
It has faced resistance but has been consolidating within the regression channel. Now Bitcoin is starting to break out of this channel.
Franzen has devised a strategy for traders. A sustained breakout suggests that Bitcoin may experience a relative increase of about 16% before reaching the midpoint of the potential resistance area.
He suggests setting a stop loss below the recent support high to guard against a relative decline of 2.2%. This setup provides a reward of 7.15 times the risk per unit.
If the stop loss is triggered, traders can sell their Bitcoin exposure while holding short stock positions to profit if the stock market declines.
Franzen explicitly stated that he does not intend to adopt this strategy himself, but he shared it to demonstrate how traders can leverage the relative performance between Bitcoin and stocks.
Even in June 2024, concerns about the weakness in breadth did not prevent the rebound. According to Franzen, their warnings have not produced any meaningful returns.
He believes that understanding breadth expansion is the key to riding a bull market. Now, two underestimated indices, the Value Line Arithmetic Index and the Value Line Geometric Index, are reaching new highs.
These indices track the average performance of the US stock market and demonstrate the breadth of this rebound.
