Bitcoin
Bitcoin Analyst Details 3 Reasons Why He Expects Price to Fall to $13.8K
If there was any barrier sitting between Bitcoin and its all-time high, they don’t seem to be there anymore.
The last few weeks have encountered the flagship cryptocurrency in a tireless uptrend, setting one year-to-date high after another. On Wednesday, it achieved another mettle by jumping towards $18,500, a level it last touched in January 2018 during a corrective downtrend from $20,000.
But to some analysts, the ongoing Bitcoin price rally has risks written all over it. One of them—a TradingView.com-based pseudonymous chartist—discussed those bearish possibilities in a note published earlier Tuesday. He detailed them with three technical indicators, adding that they hint Bitcoin would fall to at least $13,868 in the coming sessions.
#1 MACD Bearish Crossover
The TradingView analyst spotted a potential bearish crossover in the Bitcoin daily chart’s MACD indicator.
Bitcoin MACD readings on its daily chart. Source: BTCUSD on TradingView.com
A bearish crossover occurs when the MACD’s 12-day exponential moving average (blue) closes below its 26-day exponential moving average (orange). Bitcoin’s 12-DMA is currently moving further north, away from its 26-DMA, but the analyst believes that there would be a crossover on the next price correction downwards.
He stressed a so-called MACD resistance. Back in 2019, the Bitcoin price topped at $13,868 while its momentum oscillator peaked near 1044. However, this year witnessed both the cryptocurrency and its MACD breaking above the said upside ceilings. As BTC/USD broke above $18,000, the MACD also jumped above 1044.
The analyst saw this as an overstretched scenario that amounted to an aggressive downside correction. Treating 2019 as his primary fractal, he noted that BTC/USD could stretch its upside to an all-time high but would fall back below $14,000 on the next sell-off.
#2 Bitcoin Price-Volume Divergence
The next bearish factor in line is the growing divergence between the Bitcoin price and its daily trading volume. Many traders agree that when an asset’s rate rises with decreasing volumes, it shows that the uptrend is losing pace. The TradingView analyst cited the same catalyst behind his downside call, stating:
“The volume has been falling while the price has been rising. This is a bearish indicator, showing that the trading activity is supporting the elevating prices at a decreasing rate.”
Bitcoin Price-Volume Divergence. Source: BTCUSD on TradingView.com
#3 The Inverse Head and Shoulder Pattern
Another signal that aimed to prove Bitcoin’s rally above $18,000 as overstretched is an inverse Head and Shoulder pattern (IH&S).
Bitcoin market outlook as of November 17, presented by MagicPoopCannon. Source: BTCUSD on TradingView.com
The analyst noted that the Bitcoin price, on November 17, achieved the breakout target of $17,100 of the said technical pattern. He anticipated that a bearish correction from the local top would crash the price towards $13,868. Nevertheless, the price rallied further towards $18,500 during the Wednesday session.
Last checked, Bitcoin was undergoing a sell-off near the new YTD high that risked an extended downside move towards $17,000. Should that happen, the breakout move above $17,000 could prove to be a fake one, validating the analyst’s call for the 2019 high retest.
Bitcoin has had an explosive breakout year as a maturing financial asset,. The cryptocurrency is finally being considered by institutional investors for the first time, during a year that will go down in history for unprecedented money printing.
The asset’s hardcoded digital scarcity is a primary driver of its boom and bust cycles, and in the year following each block reward halving, magic happens. With the new year right around the corner, here’s a look back at past crypto market cycles for a glimpse at what to expect from Bitcoin in 2021.
Looking Back At Historical Bitcoin Market Cycles
All markets are cyclical and go through distinct phases of bear and bull trends. These cycles can take place over the course of decades, or a handful of years. In crypto, cycles often move faster than traditional assets due to the always-on, 24/7 market.
But because Bitcoin is just over a decade old, there are only a couple of boom and bust cycles at which to glean any useable data. In technical terms, when Bitcoin breaks its former all-time high, the new bull market is on.
Fundamentally, this occurs every four years following the asset’s block reward halving. This built-in mechanism slashes the supply of BTC in half at a time when demand is beginning to resume.
RELATED READING | NY TIMES BESTSELLING AUTHOR: BITCOIN S2F IS FLAWED, NOT MATHEMATICALLY SOUND
The combined effect of suddenly diminished supply and growing demand throws buying and selling equilibrium so out of balance that price appreciates exponentially.
2020 has acted as the ideal example of the impact each halving can have on the market. Bitcoin went from “a fad” to full-blown FOMO in less than nine months, all because supply and demand is so favorable to positive ROI.
And while 2020 was definitely a breakout year for a bullish Bitcoin, it is next year that will make a new wave of Bitcoin billionaires.
Halving years are marked in blue. In the year following, the cryptocurrency goes full parabolic | Source: BLX on TradingView.com
Move Over 2020, Why 2021 Will Be The Cryptocurrency’s Best Year Yet
Glancing at the chart above and it’s shocking to see just how high Bitcoin has climbed in twelve years. During the twelve years of trading, the cryptocurrency has had three distinct halvings, cutting the reward miners receive from 50 to 25 BTC, then from 25 to 12.5 BTC, to the current 6.25 BTC.
Each time this happens, demand begins to so drastically outweigh the limited supply, the asset goes parabolic and rises exponentially.
RELATED READING | BITCOIN BULL RUN IS OFFICIAL ACCORDING TO MONTHLY RSI, MORE BULLISH THAN 2017
In the two post-halving years on record, the first resulted in well over 6,000% ROI and the second just under 2,000% ROI. What could 2021 bring crypto investors?
Another 2,000-6,000% return isn’t likely simply due to the law of diminishing returns, however, even a 400% increase from current levels would result in a price of $125,000 per BTC.
Featured image from Deposit Photos, Charts from TradingView.com
A downside correction in the Bitcoin market at the beginning of this week may prepare a fresh run-up towards $30,000, says Teddy Cleps.
The independent market analyst tweeted a technically bullish set up on Monday, projecting the Bitcoin price in a trend continuation pattern. In the chart, traders can observe the cryptocurrency consolidating inside a Triangle-like structure following its parabolic upside move above $28,000 on Sunday.
Bitcoin bull run setup, as presented by Teddy Cleps. Source: BTCUSD on TradingView.com
It appears like a potential Bullish Pennant, which could technically send the Bitcoin price higher by as much as the rally that preceded its formation — aka “flagpole.” It is around $3,652 long, as measured by Bitcoinist. Therefore, the bitcoin price has a great potential of hitting $30,000 should it break the Pennant to the upside from its apex.
“The rejection from $28,000 was just telling us where the next triangle started,” said Mr. Cleps. “Let it consolidate, let it reach an apex, let it break out, and then show us the way to $30,000.”
Fundamentals
The bullish analogy surfaced as Bitcoin achieves one record high after another. The cryptocurrency reached a new one of $28,387 on Sunday as traditional markets remained close for the Christmas holiday. Meanwhile, the aggregated open interest of Bitcoin Futures hit another record level of $8.9 billion, further reflecting the market’s enthusiasm.
Bitcoin Futures aggregated open interest across all exchanges. Source: Skew
Robbie Liu, a researcher at OKEx cryptocurrency exchange, noted that Bitcoin expects to sustain its profits on booming institutional adoption. Typically, the leading crypto corrects lower after a rally as traders’ focus shifts on its rivals, causing a so-called “altcoin rally,” which is no longer the case.
Mr. Liu referred to Donald Trump’s decision to sign a bill that would pave the way for a $900 billion stimulus package to reach millions of Americans. Coupled with the Federal Reserve’s dovish policies, it would increase further downside pressure on the US dollar. The greenback is already down by more than 12 percent YTD.
“The three major U.S. stock indexes rose for the second day in a row before the Christmas holiday,” said Mr. Liu. “Meanwhile, stock index futures saw gains today after President Trump signed a new $900 billion stimulus package, and we can expect some of that sentiment to boost Bitcoin.”
Warnings for Bitcoin Bulls
As the bullish euphoria sustains, some analysts have also suggested traders prepare for a short-term downside correction — that could invalidate the Bullish Pennant setup above.
Mark Principato, the executive director at Green Bridge Investing, stated that Bitcoin’s current upside moves “are a sign of speculative froth and the herd mentality.” The analyst stated that the cryptocurrency could still fall towards $23,000, where traders can consider opening a long position.
“Please understand, when the market looks its best, that is often the WORST time to enter,” he explained. “Avoid the hype and all of the “logic” and reasoning as to WHY this move is taking place. It will not enforce good habits in the long run.”
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