Bitcoin Santa Rally or Year-End Slump? What Would It Take for BTC to Break Out

Warren had anticipated this. In late September, he told his audience that sell signals were accumulating and a correction toward the 200-day average was likely. At the time, many traders were predicting a rise above $90,000.

Why The Bottom May Already Be In

Warren believes Bitcoin’s bear-market low came in the summer, at $57,700. He cited several signs that the trend has turned:

• Bitcoin recorded its first higher high since the bear market began
• It broke above the trendline that had capped prices during the downturn
• Before the latest pullback, it had risen back above the 200-day moving average

Extreme Fear, But A Higher Price

The Crypto Fear and Greed Index has returned to extreme fear for the first time since August. Warren says Bitcoin is still about 17% higher than it was the last time sentiment was this low. In his view, that signals “a screaming healthy correction” rather than the beginning of another collapse.

The “Composite Man” Theory

Warren invoked the ideas of Richard Wyckoff, a market trader from about a century ago, to explain the recent run of bad news. Wyckoff referred to major market players as the “Composite Man.”. In this framework, large players push bullish headlines near market tops and frightening ones near bottoms.

The past few weeks have brought just that kind of news: the Binance hack, Democrats winning control of Congress and a hot inflation report. In September, Warren had cautioned his community to expect “headlines that terrify you” during the correction.

Will Bitcoin Get A Santa Rally?

Asked whether there would be a year-end rally, Warren said he mainly expects volatility. He had previously forecast a new all-time high by January 20, but now says that is “probably not going to happen.”

He said large institutions are waiting for two issues to be resolved:

• The Iran war: Oil prices have remained high amid uncertainty about the conflict
• The Fed: Following the hot inflation report, markets are pricing in about an 82% to 83% chance of a rate hike in December

What Could Spark The Next Rally

Warren believes the end of the Iran war could be a turning point. He noted that recent inflation data showed prices excluding energy rising near or below the Fed’s 2% target. Energy costs were up about 10%, while transportation costs were up about 7% to 8%.

Warren expects oil prices to fall sharply once the war ends. That would bring inflation down faster than many expect, give the Fed room to stop raising rates and could even revive talk of rate cuts—a combination that would favor Bitcoin.