Bitcoin
4 reasons why Bitcoin’s bull run is intact despite a surprise stop hunt
After Bitcoin (BTC) price suddenly dropped from around $18,500 to $17,200, some traders began to question whether a local top had formed but there are multiple factors that suggest the bull run is still intact.
Following the initial pullback, BTC continuously showed extreme volatility, demonstrating market uncertainty.
The four factors that show Bitcoin’s momentum remains strong are whale inflows, a strong market response, resilience above each whale cluster, and high open interest.
Whales are not selling large amounts of BTC
According to data from CryptoQuant, whales are not selling large amounts of BTC. This trend is noteworthy because Bitcoin is testing a heavy multiyear resistance level at $18,000.
Ki Young Ju, the CEO of CryptoQuant, said the Exchange Whale Ratio remains low. Given the relatively low selling pressure from whales, Ju said:
“Dear $BTC shorters, You can call me a moon boy, but unfortunately, there won’t be a mass-dumping like March this year. Exchange Whale Ratio (90-day MA) is still very low. Long-term bullish is inevitable.”
If the selling pressure coming from miners and whales remains low in the short term, BTC could have sufficient firepower to kickstart a broader rally.
Bitcoin remains resilient above key whale clusters
Whalemap, an on-chain market analysis firms that tracks whales, have found a similar trend. The analysts said that whales accumulated BTC throughout November The price points from which whales bought BTC are holding.
In the near term, the key whale cluster support for Bitcoin is at $16,411. As long as BTC stays stable above the $16,400 support area, the bull run will probably hold together.
A whale cluster forms when whales buy Bitcoin at a certain price level and do not move them elsewhere. The analysts explained:
“Bubbles indicate prices at which whales have purchased BTC that they are currently holding. Bubbles also visualise support levels. Last time we bounced from $15,762 and had a 15% price increase. Is the new bubble at $16,411 going to hold this time as well?”
Strong market response after a steep pullback
In addition to favorable whale data that depict the resilience of Bitcoin, every major dip has been quickly bought up in the last 24 hours.
On Nov. 18, Bitcoin dropped to $17,215 and $17,284, recording large pullbacks from its $18,520 peak. Yet, BTC recovered almost immediately after each minor correction, stabilizing above $17,600 for most of the time.
Open interest is growing
Data from Skew shows that the open interest in the Bitcoin futures market is increasing. The open interest of the futures market shows the sum of all long and short contracts.
High open interest typically means that there is a significantly high number of traders speculating on the price of Bitcoin.
In the near term, this means major price movements are inevitable. Whether the volatility spike would cause BTC to increase or suffer a deep correction remains to be seen.
However, based on the optimistic whale data and the market’s strong reaction to large dips, the chances of the next volatiltiy spike favoring Bitcoin are higher.
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.”
‘Bullish year ahead’ — Bitcoin primed for Q1 2021 gains, strength index suggests
The new ‘Bank of England’ is ‘no bank at all’
New York authorizes first Yen stablecoin operator in the US
-
Bitcoin4 Monaten agoBitcoin and cryptocurrency are no hedge for inflation
-
Regulation3 Monaten agoCongress weighs crypto payments and fintech lending in hearing today
-
Bitcoin3 Monaten agoMicroStrategy CEO seems to embrace Bitcoin maximalism
-
Altcoin3 Monaten agoDfinance: Layer 2 Blockchain Network
-
Cryptocurrency4 Monaten agoBank of England is Planing to Adopt Digital Currency
-
Monero9 Monaten agoSophisticated Mining Botnet Identified After 2 Years
-
Market4 Monaten ago
The request could not be satisfied
-
Blockchain3 Monaten agoThe US is number one…in blockchain patents
