Breakout Watch

The crypto market is back in the limelight as Bitcoin’s price jumped to its highest level of 2022, breaking through key resistance levels along the way. We’ve been waiting for BTC to break through the $46-48K range, for example, before sounding the alarms of a potential trend reversal. The low-end of that range is where Bitcoin’s price started the year, while the high-end marks the anchored VWAP since BTC’s all-time high.

Bitcoin’s recent price strength pushed its 14-day RSI above 70 for the first time in over five months. Historical precedent favors the bulls here as average forward returns over the subsequent 30-90 days tend to be largely positive.

For context, over the last 10 years, when BTC’s 14-day RSI breaks above 70 (~120 occurrences):

BTC’s forward 30-day return is positive 66% of the time with an average return of ~17%
BTC’s forward 60-day return is positive 66% of the time with an average return of ~30%
BTC’s forward 90-day return is positive 70% of the time with an average return of ~55%

When we shorten the time horizon to the last 5 years (~60 occurrences), we see similar results.

Median returns over the following 60-90 days are usually strong as well, though it does point to a potential consolidation period before another strong move higher.

We’re also seeing signs that selling pressure in the futures market is abating. Futures basis is ticking higher after its recent low; prior occurrences coincided with local bottoms in BTC’s price.

We highlighted last week how year-over-year returns for BTC had flipped negative, which indicated most of the p