- Bitcoin price on the weekly timeframe is forecasting a potential correction to $34,000.
- The daily chart also showed a bearish triple divergence which echoes the weekly sell signal.
- While the short-term outlook awaits a correction, the long-term outlook remains optimistic.
The price of Bitcoin (BTC) is showing signs of slowing after Thursday’s sudden sell-off that wiped out more than $1 billion in open interest and hundreds of millions of dollars in liquidations. While this caused many altcoins to suddenly fall by double digits – before quickly recovering – others continue to face immense selling pressure. Despite the recent debacle, investors remain optimistic and expect the 2023 recovery to continue.
Bitcoin Spot ETF Approval Window
The approval of a Bitcoin ExchangeTraded Fund (ETF) has been the talk of the town in 2023. After multiple delays and no-shows, Grayscale’s victory against the U.S. Securities and Exchange Commission (SEC) has increased the chances approval, even suggesting that this could be accelerated.
Since November 8, the ETF approval window has opened and extends until November 17.
As Bloomberg research analyst James Seyffart described it, the “ETF window” is when the SEC must provide rebuttal comments if ETF applications are delayed or rejected. The regulator, which previously refused ETF filings from all 12 applicants, is now ready to provide rebuttal comments or approve them.
In a recent note, James Seyffart added:
A brief window opens on November 9 for the SEC to potentially approve all 12 US spot Bitcoin ETF applicants, including Grayscale’s GBTC. It will be open for at least eight days. Even if approvals don’t arrive this month, we still believe there is a 90% chance of approval by January 10th.
Experts say that if approval comes, it will affect all 12 candidates. But the positive side of this development is that despite the approval of the ETF, it will be at least a month before the launch of the spot ETF.
ETF window or not, Bitcoin Price rallied in anticipation of this approval.
BTC first-line ETF approval
The price of Bitcoin (BTC) has led ETF approval news, leading to returns of 121% year-to-date. Going forward, the same is likely to happen, especially given the SEC’s position and the ETF approval window.
On November 9, there was a sudden 6% sell-off, which wiped out $1.6 billion in open interest. In total, liquidations on November 9 totaled nearly $500 million according to CoinGlass data.
BTC OI, total crypto liquidations
BTC Weekly Chart Forecast Marks Pause in Uptrend
Weekly chart, the price of Bitcoin completed closing the fair value gap (FVG), rising from $34,243 to $37,386. Interestingly, this gap forms around the midpoint of the weekly bearish breakout which extends from $28,805 to $41,330.
The fair value gap forms when there is a sudden price movement in only one direction. The FVG is populated to provide a balanced price.
The bearish breakout is a reverse demand zone with trapped bulls looking to exit. Therefore, a retest of the demand zone from below is likely to trigger a wave of selling. The same can be seen in the weekly chart where the first and second retest of this weekly breakout in April and June resulted in corrections of almost 20%.
BTC/USDT 1-week chart
ETF approval news negated selling pressure from the weekly breakout, which pushed Bitcoin price up to $38,000. Although unlikely, if there is a lack of response from the SEC or delays in approving the ETF, it could send BTC lower.
The Momentum Reversal Indicator (MRI), which issued a red “one” sell signal, adds credence to the potential pullback scenario. This configuration predicts one to two bearish candlesticks.
After the COVID crash in March 2020, BTC rose 174% from the low of $3,782 and set a local high at $10,380. The MRI produced a similar red “one” sell signal, which led to a 15% crash from the high and produced a higher low at $8,833. After which, the upward trend resumed.
The current outlook for BTC appears similar. If history repeats itself, Bitcoin price could return to $34,000. Interestingly, this level coincides with the newly created FVG, ranging from $30,379 to $34,025.
A rebound in this area could be vital to kickstart the next leg of the bull rally. In such a case, Bitcoin price could easily target the psychological level of $40,000. Beyond this hurdle lies $46,680, which is another key resistance barrier for BTC bulls to overcome.
BTC/USDT 1-week chart
BTC daily chart hints at imminent correction
On the daily chart, Bitcoin price made three higher highs that are not confirmed by the relative strength index (RSI). This non-conformity is referred to as a bearish divergence and often leads to a retracement of the price of the underlying asset.
The chances of a triple divergence occurring will be higher if the next daily log candlestick closings are under $37,000. Assuming this outlook comes true, investors can expect BTC to target the sell side. liquidity (SSL) below the lows formed since October 27. This move is expected to bring BTC back to around $34,000.
In a dire scenario, where panic selling ensues, Bitcoin price could fall to the daily FVG, extending from $30,229 to $32,833. As shown in the chart below, the weekly support level at $31,767 is a good confluence to buy dips.
BTC/USDT 1-day chart
Invalidation scenarios
The following are invalidation scenarios that would bypass the short-term sell signal and lead directly to a continuation of the uptrend:
- US SEC approves all 12 ETF applications filed in the ETF window described above: This scenario will not only push BTC past the $38,000 hurdle, but also propel it to $45,000 or more. Such a scenario would even have enough FOMO to push BTC to a level where it challenges 2021 highs of $60,000.
- A daily candlestick closing above $38,000 invalidates the bearish divergence sell signal: This prospect will dampen the short-term sell signal and lead to one of two things: a sideways move or a slow rise, up ‘until the flow of news regarding ETFs decreases.