Bitcoin retests $38k: Is bullish rally continuing?

The main cryptocurrency spent the first half of this week in a local decline. Positive news temporarily subsided, and sellers significantly increased volumes, leading to a decrease in the value of BTC to the local support level of $35.5k. The cryptocurrency was on the verge of breaking the lower boundary of the upward channel, which could have led to an increase in bearish sentiment.

However, the situation changed drastically on November 15, following several important macroeconomic and geopolitical events that positively impacted the state of global financial markets. As a result, Bitcoin rebounded from the support area around $35.5k and made a powerful leap to the $38k level. Given the sharp change in the situation, it is likely that the next target for Bitcoin will be the $40k level.

Over the past few months, the situation on the macroeconomic and geopolitical arenas has intensified. Rising inflation levels in the U.S., the conflict in Israel, and the rapid increase in energy resource prices fueled pessimistic sentiments in the market. However, in mid-November, the situation changed dramatically, and the final chord in the financial market euphoria was the meeting between the leaders of the U.S. and China.

Despite restrained statements, investors saw reasons for optimism in the outcomes of the meeting between the leaders of the two superpowers. Against this backdrop, oil prices continued to correct, while other investment assets continued to rise. The FedWatch indicator reached a record level of 100% optimism among investors; the markets expect another pause in the Federal Reserve's monetary policy and hope the agency will begin to ease rates as early as 2024.

Despite Bitcoin reaching $38k, further rallies raise questions due to decreasing buying volumes. This week, the rise in BTC was more against the backdrop of declining bullish activity, which is a worrisome signal indicating the weakness and manipulability of the current rise. JPMorgan also stated that the fundamental reasons for the BTC rally are weak. Essentially, the market rose on fundamental news and rumors of the possible approval of a spot BTC ETF.

Investors continue to accumulate BTC coins—more than 70% of the cryptocurrency's supply is concentrated in the hands of long-term investors who have held their assets for at least a year. At the same time, profit-taking speeds are also increasing, which will ultimately lead to a drop in the value of the cryptocurrency. In the last month alone, over 34,000 BTC were sent to crypto exchanges, amounting to over $1.1 billion.

Despite the successful rebound of the BTC price from the $35.5k level and the retest of the $38k level, further decline in the asset's price led to liquidation of long positions amounting to $264 million. On Thursday, November 16, the correction continues, and BTC/USD is trading near the $37.5k level, with daily trading volumes around $28.5 billion. Given the sudden surge of positivity in global markets, there is a high probability of the Bitcoin bullish rally continuing to the $40k level.

The key factor in the potential upward movement to $40k is holding the lower boundary of the upward channel at $35.5k–$37.5k. Bitcoin managed to rebound from $35.5k and reach the $38k level, but for further price growth, BTC needs to establish itself above $38k. In such a case, the likelihood of further impulsive movement towards $40k significantly increases. However, the probability of a confident upward move gradually decreases due to declining trading activity and profit-taking by all categories of investors.

Considering this, Bitcoin needs to solidify above $38k in the coming days to initiate consolidation and continue the rally to $40k. Technical metrics indicate strong buyer positions; however, as the positive news fades, such sentiments will decline. If the $37k level is breached, Bitcoin will lose the chance to test the $40k level in the near term. The asset still appears overbought, and for the formation of a more sustainable upward trend, BTC requires a correction.

Considering the overall wave of positivity triggered by the easing of the geopolitical situation, Bitcoin may resume its upward movement and set a new local high at $40k. However, the most favorable scenario for Bitcoin would be a correction to the target levels of $32k–$33k and consolidation in this range leading up to the year-end rally, where the chances of retesting $40k will significantly increase. In terms of the short-term perspective for BTC/USD, even in the case of reaching $40k, a correction can be expected, as profit-taking volumes continue to grow.