Bitcoin
3 Reasons Why Bitcoin Price Could Fall to $14,000
Bitcoin fell drastically this week, paring some of its December gains and maintaining its stretch of volatility on profit-taking sentiment among daytraders.
Most actively traded bitcoin derivatives plunged by an average of 13 percent to $17,705 from their all-time highs established last week. Meanwhile, the flagship cryptocurrency’s spot rate is still up 70 percent in the fourth quarter, signifying that its latest move downhill could be an organic bearish correction.
Bitcoin Futures on CME plunge lower. Source: BTC1! on TradingView.com
Investors tend to buy Bitcoin when they are fearful of the global economy’s outlook. This trend boosted the cryptocurrency’s demand earlier this year after the US Federal Reserve’s cheaper lending and unlimited bond-buying facilities reduced the appeal of the traditional safe-havens like the US dollar and the Treasury.
Nevertheless, a confluence of at least three fundamental indicators and technical fractals suggests that Bitcoin’s price may continue to head lower in the coming sessions.
#1 The 20-WMA Magnet
The 20-day exponential moving average serves as a short-term bias indicator for Bitcoin traders. If the cryptocurrency’s price holds the wave as its support, its likelihood of trending upward becomes high. Nevertheless, slipping below it extends the downside move a majority of times.
Since November 26, Bitcoin has tested the 20-DMA at least four times for a breakdown move. But it also met resistance from bulls, which led to solid rebounds — one of them even leading to the new all-time high near $20,000. Therefore, the cryptocurrency has the potential of paring its recent losses if it manages to float above the 20-DMA level.
But Bitcoin’s weekly chart provides a more downside outlook.
Bitcoin habitually retests its 20-weekly moving average after every upside rally. Source: BTCUSD on TradingView.com
Behind the short-term downbeat bias is a fractal. Bitcoin tends to revisit its 20-weekly moving average (20-WMA) after each of its uptrends. In certain cases, the downside correction turns into a full-fledged bearish move. But in others, the price treats the 20-WMA support as a floor to attempt another bullish move.
More or less, Bitcoin tests the 20-WMA wave, which means it may fall towards it in the coming sessions. The wave sits near $14,000.
#2 Bitcoin Miners Capitulation
The prospects of price hitting $14,000 increase also because of Bitcoin’s on-chain fundamentals. Ki-Young Ju, the chief executive of CryptoQuant — a data analytics platform, noted that miners — who provide security and confirm Bitcoin transactions — are selling their rewards en masse.
Some of their BTCs are ending up on exchanges. In contrast, others are getting deposited in cold wallets. Mr. Ju noted that an increase in exchanges’ Bitcoin inflows could prove bearish for the cryptocurrency in the short-term.
Obviously, miners are selling $BTC a lot today.
I’m still long, but this is not a good signal in the short-run. https://t.co/bJXnzmMlAp pic.twitter.com/amrgr8LPZE— Ki Young Ju 주기영 (@ki_young_ju) December 10, 2020
“The total outflow is not that big, but it’s relatively increasing compared to past days. Also, the number of outflow [transactions] is unusually high today. The miner-to-exchange flow seems small for now, so I stick to my long. I hope those outflows are [over-the-counter] deals.”
#3 US Regulation
The technical price target of $14,000 looks attainable because of the rumors of strict Bitcoin regulations in the US. On Thursday, US Congressman Warren Davidson penned a letter to Treasury Secretary Steven Mnuchin to provide details regarding any proposal that may [allegedly] impose restrictions on the use of private wallets.
I’m troubled by rumors that @StevenMnuchin1 plans to enact burdensome regulations on digital self-hosted wallets. My colleagues @RepTomEmmer, @RepTedBudd, and @RepScottPerry have sent a letter to @USTreasury urging him to rethink these regs & consult with Congress on #FinTech. pic.twitter.com/p7HPtuuizn
— Warren Davidson (@WarrenDavidson) December 9, 2020
If Mr. Mnuchin goes ahead with his [alleged] plans, it may prompt panic-selling in the Bitcoin market.
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
