Key Insights:
Rekt Capital has identified a unique behavior of Bitcoin's price where close to its halving event, the price first rallies before the halving, then retraces back before ultimately rising parabolically.
We had earlier described a similar behavior where Bitcoin's price skyrockets multiple times its pre-halving price.
Rekt Capital, a crypto trading coach and analytics firm, has shared a unique theory which seeks to explain Bitcoin's price behavior near its halving event. The theory has been proven to be fairly accurate and describes how the price witnesses a parabolic rise after its halving.
The theory identifies a line called Macro Diagonal which acts first as a resistance and later as support for the price of Bitcoin. It divides the price behavior into six parts during the halving event.
As in the past, Bitcoin currently experiences a pre-halving rally where its price rises two months prior to the halving. This price rally was seen from Jan 2024. However, in previous halving cycles, the price would pause its rally near the macro diagonal, which would act as a resistance line.
#NOTE: A macro diagonal is a resistance lines on Bitcoin's logarithmic charts. It is obtained by connecting the top left corner of its recent highs(in the current halving period) to the day marking its upcoming halving day but below the high in the current halving.
In the above image, the black lines with a downward slopes(8-degree) are macro diagonals.
Rekt Capital points out a special behavior this time where it shows that the price has already moved above the macro diagonal.
According to the theory, a few weeks prior to the halving, Bitcoin witnesses a decline in price where after the first encounter with the macro diagonal, the price initially declines. This happened both in 2016 and 2020.
However, in this halving cycle, the price seems to form a monthly candle above the macro diagonal as can be seen in the image below. The monthly candle is depicted inside the yellow circle.
The formation of this candle (of Feb 2024) would show that the price has now a strong support at the macro diagonal.
Bitcoin then tends to reverse its upwards trend after encountering the resistance at the macro diagonal. Here, the price tries to move above the diagonal but fails.
In 2016, the macro diagonal made Bitcoin retrace its price only once. However, in 2020's halving cycle, the price was rejected thrice before the price moved above the macro diagonal resistance.
As per Rekt Capital, the macro diagonal weakens after the first encounter, finally allowing Bitcoin's price to move higher in subsequent attempts.
In the below image, the yellow circles depict the macro diagonal rejection with the macro diagonal being shown as a black line with a 8-degree negative slope.
This period witnesses an accumulation of Bitcoin as per Rekt Capital. The accumulation drives the price higher and it finally crosses the high made during the pre-halving rally.
Historically, this re-accumulation has taken place below the macro diagonal. However, since this month's candle is expected to form above the macro diagonal, the current halving cycle might see the re-accumulation happen above this diagonal for the first time.
Rekt Capital adds that it is also possible that in the post halving period after April 2024, the price may even re-touch the micro-diagonal from the upside, using it as a support this time.
The retest happens when price tries to break out of the macro diagonal after re-accumulation. The micro diagonal becomes the support taking Bitcoin towards its parabolic price curve as seen after previous half cycles.
Rekt Capital notes that the breakout into new all time highs occurs around 215 days after the halving.
In this halving period, this date comes around Thursday, November 19, 2024.
After taking a support at the macro diagonal, Bitcoin prices continue upward trend, finally making a new all time high. The path taken by its price becomes parabolic.
The last tweet by Rekt Capital confirms Bitcoin's transition into a pre-halving rally. This means that for the next six weeks (till mid-April), Bitcoin's price will continue to be in a bull mode
The Macro Diagonal theory used data to confirm a rally in Bitcoin which several experts have confirmed in the recent past.
However, this time Bitcoin seems to be in a much more bullish mode than ever.