Summary Bitcoin has broken through the historic $90,000 resistance as we expected, entering uncharted territory with the potential to reach up to $200,000 in the ongoing bull market. Our strategy that tilted into Bitcoin mining companies underperformed, leading us to consolidate back to 100% Bitcoin according to plan. Past bull runs suggest buying the breakout is more favorable than waiting for a significant pullback, as the current price offers the next best profit-risk profile. Introduction In September 2024, we published 2 events consistent with a bull run toward a new ATH. Towards the end of October 2024, the 2 events finally occurred . Within a month of the occurrence, Bitcoin ( BTC-USD ) rose from $70,000 to $95,000 (Fig 1), as we expected. The $90,000 resistance level (the yellow curve in Fig 1) is one of the most, if not the most, significant resistance levels for Bitcoin because it has guided the Bitcoin price over the past decade and had never been broken through. By referring to Fig 1, we can observe that this decade-old resistance level has guided all of Bitcoin's past all-time highs ('ATHs') since Bitcoin's inception. Back in 2021, it also served us well when we used it to predict the top of the 2020-2021 bull market and the sequence of events of the 2021-2022 bear market. Nevertheless, our findings suggested that the $90,000 resistance level is meant to be broken because it can only project up to a $90,000 Bitcoin. This week marks this historic moment where Bitcoin has likely broken through this decade-old resistance. Although Bitcoin is now entering uncharted territory where we can no longer rely on it to predict Bitcoin's new ATH, Bitcoin is finally free from being confined to a peak of $90,000, which now makes our $200,000 bull case price target more attainable. As Bitcoin realized our base case scenario, we'll follow up on our Bitcoin investment thesis and update our action plan in this article. Fig 1. Bitcoin's Decade-old Cycle is Broken (Author) Performance To Date Our previous article detailed our game plan to time the market and trade the Beta of Bitcoin mining companies. We first established our bullish thesis, which is that we expect Bitcoin to reach a new ATH as high as $200,000 based on the diminishing magnitude of each bull run over each halving cycle. After we waited for the 180-day wait period to lapse and for the Coppock curve to turn positive, we tilted 25% of our Bitcoin portfolio to 2 Bitcoin mining companies (CleanSpark ( CLSK ) and MARA Holdings ( MARA )) that we showed to have the best odds of beating the market. You can refer to our thesis below: MARA Holdings: A Market Mistake Where Investors Can Exploit CleanSpark Offers A Unique Proposition And Is Now Heading To Undervaluation At the time of writing, Bitcoin has fully reached our base case price target of $90,000, which is our minimum price target for Bitcoin. We also mentioned that it is within our plans to consolidate our crypto portfolio back to 100% Bitcoin once this price target is realized. If Bitcoin reaches $90,000 as we expect, we'll consolidate the portfolio back to 100% Bitcoin by selling all Bitcoin mining companies. This aligns with our stance to be conservative. So we've proceeded to liquidate our CLSK and MARA positions back into spot Bitcoin. The reason for this early consolidation is because MARA and CLSK may still be among the top 3 best-performing Bitcoin mining companies among the major Bitcoin miners (beaten only by Hut 8 ( HUT )), none outperformed Bitcoin as we hoped. We think that this could be a sign that the market no longer perceives Bitcoin mining companies as a levered Bitcoin play and is increasingly aware of their systematic and unsystematic downside risk . This implies that Bitcoin mining companies might now have a lower Beta to Bitcoin on the upside but a higher Beta on the downside. In other words, Bitcoin mining companies might appreciate less than Bitcoin in a Bitcoin bull run but decline more than Bitcoin in a Bitcoin bear market. Fig 2. Performance of Bitcoin and Bitcoin Mining Companies (YCharts) The Updated Thesis Now that Bitcoin has broken through the historic $90,000 resistance level, the most likely dilemma for investors and traders is whether to wait for a pullback (retest). The consensus to identify a support resistance ('SR') level is that the price has to bounce off a specific level at least twice. Once broken, a resistance will turn to support, and vice versa. Then, the common breakout trading strategy is to wait for a retest on the resistance-turned-support or the support-turned-resistance level to avoid a fakeout. While it may be a valid strategy, the retest might not come. The dilemma would be whether to enter at a less optimal price with a less attractive profit-loss ratio, or risk completely losing out on the opportunity. Whether to buy on a breakout or a retest depends on the trader's expectation of Bitcoin's probable price action. Our findings suggest buying on this breakout now is better than waiting for a retest. Firstly, we are still early in the Bitcoin bull market. Past halving cycles suggest that the minimum Bitcoin bull market spans one year and can extend for another six months starting from the halving event. This implies that the Bitcoin bull run is expected to last at least until April 2025 and up to October 2025. This is why we expected Bitcoin to hit our $100,000 base case price target with minimal headwinds before April 2025 . With 5 to 11 months left in this bull cycle, it is increasingly likely that Bitcoin will reach our bull case price target of $200,000. If one intends to wait for a retest, the 2 potential levels for retest are the $90,000 price level and the $73,000 price level (Fig 3) Therefore, it should be fine whether Bitcoin retests or not. Secondly, if Bitcoin were to pull back and retest significant support levels, it would unlikely reach the $73,000 support level (marked in yellow) based on the two past bull runs. Fig 3. 2 Major Support Level Marked in Yellow Horizontal Line (Author) (Author) As we've explained in our previous thesis, the first 6 months of a Bitcoin bull market involve reclaiming the existing ATH (Phase 1), while the subsequent 6 to 12 months involve reaching for new ATHs (Phase 2). Looking closer, the price coming out of Phase 1 usually marks the lowest price for Phase 2. Coming out of Phase 1 in the 2016-2020 cycle, Bitcoin continued its weekly pullback down to the nearest (and significant) $740 support level and has never retested that level again in Phase 2 (Fig 4). Fig 4. Phase 1 and Phase 2 of the Bull Market in the 2016-2020 Cycle (Author) (Author) Coming out of Phase 2 in the 2020-2024 cycle, Bitcoin exited Phase 1 at $16,000 and continued to break the 2016-2020 cycle ATH ($20,000) without any significant pullback back into Phase 1 price levels (Fig 5). Fig 5. Phase 1 and Phase 2 of the Bull Market in the 2020-2024 Cycle (Author) (Author) These observations suggest that it is unlikely for Bitcoin to revisit the $73,000 price level, even though it is a significant support level. It is more likely for Bitcoin to retest the $90,000 price level. However, a retest to the $90,000 support level now only represents a 3.6% drawdown, which is insignificant considering the potential bull case upside is a 120% return (if Bitcoin reaches $200,000 from the current $93,000 price). Conclusion Although our attempt to replicate our success via Bitcoin mining companies didn't yield the desired result, we are excited to see our base case scenario for Bitcoin realizing this early in the second phase of the 2024-2028 Halving Cycle. While we're still experimenting with magnifying Bitcoin returns via Bitcoin options contract (just like our past trade on BITO ), more work is required before we're comfortable with the added risk. In this article, our findings suggest that buying the breakout is more favorable than waiting for a significant pullback. Firstly, it is unlikely that Bitcoin will revisit the $73,000 support level while it remains close to the historic $90,000 support level. Secondly, Bitcoin is likely still in the early stages of a bull market, with more upside potential lasting anywhere from 5 to 11 months. If you've missed our previous entry to enter below $70,000, this might be the next best entry price before Bitcoin reaches new ATHs
