Bitcoin
A Flurry of Double Top Snubs Hints Bitcoin Will Hit $21,000
Bitcoin has more fuel to continue its bullish rally.
Independent analytics firm TradingShot wrote that BTC/USD could hit $21,000 in the coming sessions in a note Monday. Its upside bias took cues from a confluence of chart signals that provably assisted Bitcoin in rallying almost twofold in the fourth quarter. The same signals envision the cryptocurrency at $21,000.
The Setup
The bullish setup consists of a widening Rising Wedge, a cyclical Relative Strength Indicator, and a flurry of super-bearish Double Top patterns that do not work as intended. As the chart above shows, Bitcoin is forming the Double Top, awaiting a breakout above it, with a target sitting around the upper Wedge trendline.
Bitcoin “Bullish Megaphone” setup, as presented by TradingShot. Source: BTCUSD on TradingView.com
Meanwhile, the RSI is also showing signs of growth. What’s further acting as a bullish catalyst is a supporting wave at the 4H 200 moving average (the orange one in the chart above).
“So why $21,000 in particular,” explained TradingShot. “This is due to an underlying Fibonacci sequence within the Megaphone. As you see every time BTC touches the Top of the Megaphone, it is roughly on the 1.000 Fibonacci extension from the previous High. And that Fibonacci extension is around $21,000 next.”
Bitcoin Fundamentally Strong
The prospects of Bitcoin hitting yet another all-time high grow higher also because of a supportive macroeconomic environment. The cryptocurrency is experiencing renewed buying interest from retail and institutional investors alike, primarily those seeking alternatives to a bearish US dollar and similar fiat-based markets.
In May, billionaire investor Paul Tudor Jones allocated 1-3 percent of his $22bn-portfolio to Bitcoin Futures. Two months later, MicroStrategy, a Nasdaq-listed software firm, bought $250 million worth of BTC to replace its cash reserves. It invested another $175 million into Bitcoin in October 2020.
The same month saw Square, a global payments firm, revealing about $50 million worth of BTC sitting in its Treasury. Meanwhile, Square’s top rival PayPal integrated Bitcoin-enabled services into its flagship platform, thus bringing the cryptocurrency before its hundreds of millions of users.
Travis Kling, the founder of Ikigai Asset Management, called the growing Bitcoin institutionalization a “Traditional Onslaught,” adding that the cryptocurrency is “just getting started” with sticky money investments.
Bitcoin adoption booms among mainstream firms. Source: Travis Kling
The Winklevoss Twins, who run a cryptocurrency exchange called Gemini in the United States, also noted that Bitcoin’s actual value is about 25 times higher than what it is at present.
“Our thesis is that Bitcoin is gold 2.0 and it will disrupt gold,” said Tyler Winklevoss. “If it does that it has to have a market cap of $9 trillion. So we think bitcoin could price one day at $500,000 a bitcoin. So at $18,000 bitcoin it’s a hold or if you don’t have any its a buy opportunity because we think there’s a 25x from here.”
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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