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Bitcoin Analysis for 14/01/2021

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Today, the price of bitcoin had a swift recovery after dropping close to 30% on Monday and Tuesday.

After bitcoin reached a new all-time high of $42,000 it crashed nearly 30%, finding a low at $30,000, according to CoinGecko. BTC/USD lost north of $10,000 in less than two days.

In the past 24 hours, the price of bitcoin had recovered north of 2%. At the time of this writing, bitcoin is trading at $36,300. Since yesterday, daily volume has remained mostly flat, however this time it is being fueled by buyers, instead of sellers.

As we predicted yesterday, the price of bitcoin remained within the blue trading range, including a minor wick that touched the predicted bottom around $32,000. We were also correct in guessing that the price would start to move back up, even though there was a minor chance for the sell-off to continue. Fortunately, buyers came to the rescue.

Today, news media outlets are sharing the story of ex-Ripple’s CTO, Stefan Tomas, who now has just two guesses to access his bitcoin wallet, containing over $245 million, before he loses access.

According to the CoinDesk:

“Almost a decade ago, Stefan Thomas, the former CTO at blockchain company Ripple Labs, was given 7,002 bitcoins worth $2-$6 each for making a cryptocurrency explainer video, reports the New York Times. Two attempts now remain before the device auto-encrypts its contents, leaving Thomas’ fortune in limbo.”

Even though this is a wild story, it’s not scaring away buyers.

To conclude our introduction, we think that last weekend’s price move that went above $40,000 attracted a horde of new sellers; however, we believe that the short-term trend has now reversed, and new buyers will soon push the price above $40,000.

For now, we think BTC/USD might have a few bounces near $40,000 before breaking this resistance point.

As a reminder, we are confident BTC/USD will continue to move upward if:

  • BTC/USD remains above its 20-day EMA (red), 50-day EMA (green) and 200-day EMA (blue).
  • BTC/USD doesn’t drop below $35,000
  • BTC/USD daily volume goes back above its 21-day Moving Average.

What Do Traders Think?

The first tweet of the day comes from Ki-Young Ju, CEO at CryptoQuant.com.

In his post, Ju shares the BTC: Realized Market Cap chart. According to CryptoQuant.com, the chart measures “The stored value of BTC calculated by summing up each BTC at the price when it was last moved.”

Ju writes that since there is a significant portion of bitcoin lost forever, the total bitcoin Realized Market Cap measured in gold is only 2%. Therefore, as Ju explains, “If digital gold (BTC) replaces 10% of $XAU market cap then the $BTC price would be $154k.”

Just like we discussed yesterday, since 2018, bitcoin grew north of 900%, while gold grew by less than 50% of bitcoin.

It’s not unreal to think that bitcoin could continue to overtake gold, as the cryptocurrency’s volatility is quite more extreme than that of gold. That means that the upside is much greater for bitcoin.

The next update comes from MMCrypto, a cryptocurrency trader with nearly 100,000 Twitter followers.

In his post, MMCrypto shares the chart of bitcoin and adds two trend lines, one showing support and the other resistance. He adds a straight line up, showing that he thinks once bitcoin breaks the top, it will move towards its previous record price, around $42,000.

As we have discussed in the introduction, we are quite bullish on the current price of bitcoin. Not only does it respect important support levels, such as the 20-day EMA, but volume shows buyers are returning in full force.

Could we expect BTC/USD to continue its momentum towards $100,000? Perhaps even above $154,000 as Ju predicted?

To help us understand the future price action of bitcoin, we’ve picked up the following tweet by Dan Tapiero, a legendary global macro investor with over 25 years of experience and founder of DTAP Capital.

In his post, Tapiero shares a chart we’re quite familiar with: the S2FX, or stock-to-flow, chart by PlanB, which uses scarcity to quantify bitcoin value.

Essentially, Tapiero wrote that the price of bitcoin has so far respected the price levels predicted by the model, meaning BTC/USD could move above $100,000 during Q3 2021. He also warned that there could be sideways action until 2024 when the next bitcoin halving occurs, that will cut the supply of bitcoin in half.

However, we should question if the price of bitcoin is going to follow the S2FX model forever. In our opinion, it won’t. The fact is that the more bitcoin is minted, each halving event will be less impactful. Adding to that, any model is mostly a regression of the price, and as we are constantly warning investors and traders: "past performance is no guarantee of future results."

This thesis is also supported by Eric Wall, a top cryptocurrency researcher and the creator of the infamous Rainbow chart, that also predicts a rising bitcoin price.

Therefore, always be cautious when using any model to time the market.

The last tweet of the day comes from Danny Scott, the CEO of Bitcoin Exchange@ CoinCorner.

In his post, Scott tries to predict when the next bitcoin cycle all-time high is going to take place.

He writes that in 2012, it took bitcoin 341 days from the previous halving to find a top, while in 2016 it took 527 days.

Scott concluded, “If history plays out we could expect a new high between 17th April 2021 and 20th October 2021”. He also added that “Given the rate (days) to hit $20k it may indicate around the end of September 2021.”

Therefore, we could see bitcoin topping somewhere in Q3 2021 at a price between $100,000 and $200,000.

Bitcoin Price Prediction

Last week, bitcoin had an epic surge of more than 17%, breaking a new price record during the weekend when it traded at $42,000 according to CoinGecko. This week, BTC/USD had a significant decline of almost 30%, but the price has now started its recovery towards $40,000.

In the past 24 hours, bitcoin’s price rose to around $36,300, according to CoinGecko. Yesterday, we predicted the price of bitcoin would start its short-term trend reversal towards higher price ranges. That’s precisely what happened. There was a minor wick that touched the predicted bottom, at around $32,000, but that was expected.

Therefore, we think BTC/USD will continue its move towards $40,000 at the end of the week. It is our view that this recent dip will attract a horde of new buyers, which should include more institutional buyers. As we discussed earlier, and through the course of the week, macro investors and bitcoin analysts believe the price of bitcoin will find a new cycle all-time high above $100,000, sometime during Q3 2021.

How do we think the price will trade today? As shown in the above chart, we think that bitcoin won’t go above its previous high, near $42,000.

On the other hand, we don’t expect the digital currency to drop below today’s low, of $32,000 due to the high number of buy orders placed between $30,000 and $35,000.

To finalize, the Volume Profile Visible Range (VPVR) shows a high number of buy orders between $28,000 and $26,200 and then again between $22,500 and $23,000, which means BTC/USD should not go below $22,000, even if things deteriorate significantly.

As a reminder, we believe that BTC/USD will soon recover and move above $40,000 until the end of the week. Not only that, but we think the chance for a sudden trend reversal is extremely thin.

Posted Using LeoFinance Beta