Bitcoin passed $14,000 for the first time since 2018 this weekend, with October seeing the second highest monthly close on record.
What’s next for the largest cryptocurrency as the US elections loom and Europe succumbs to fresh coronavirus lockdowns?
Modern Consensus takes a look at the state of the market and where Bitcoin may be headed. We also publish a weekly review every Friday, the latest edition of which may be found here.
Trump vs. Biden sets the stage for market volatility
The only narrative coming from America this week is the outcome of the presidential elections, which are rumored to already have produced record turnout.
The implications of who enters the White House on Tuesday are clear for macro markets — Democrats and Republicans differ on everything from foreign policy to the size of the US’ coronavirus stimulus package.
On Monday, the dollar was holding out, with the US dollar currency index (DXY) continuing its climb from last week.
Bitcoin also gained, shrugging off previous inverse correlation with DXY to post its first crossing of $14,000 resistance in almost three years.
On the day, however, a downturn took hold, taking BTC/USD to lows of $13,370 and fluctuating around $13,500 thereafter.
A taste of the volatile conditions to come underscores the stubbornness of $14,000 as a resistance level. Despite closing out October at $13,750, Bitcoin was unable to make any meaningful attempt to flip that level to support.
“If there’s a heavy drop or crash occurring, I don’t see $BTC running up from there as there’s a deep need for liquidity,” trader Michaël van de Poppe summarized on Sunday.
“This deep need will drive investors towards the U.S. dollar. But after that, more people will adapt and shift to $BTC as an option to opt-out of the system.”
Van de Poppe was discussing the possibility of macro repeating its March crash, at a time when many countries, particularly in Europe, are entering a second wave of coronavirus lockdowns.
In the short term, meanwhile, he warned that $13,550 must hold as support in order to avoid a scenario in which $13,000 also gives way. Lows then would be around $12,700, he said, contrasting with previous beliefs that $13,000 provides solid support from large volume buyers.
Others were less interested in the elections, with CasaHODL CTO and co-founder Jameson Lopp arguing that Bitcoin would shrug off politics in the end.
“The identities and opinions of the politicians who win the next election will be of no consequence to the continued operation of the Bitcoin network,” he summarized late last week.
Analysts stay committed on bullish future
Also more pragmatic about the coming trading period was Josh Rager, who was impressed by the monthly close but acknowledged that gains would come in tandem with consolidations.
“Another strong weekly close on high time frame,” he tweeted on Monday.
“With that said, let the ‘dips’ come. It shouldn’t surprise anyone who’s been in this market when it happens. Bitcoin had 9+ pullbacks of at least 30% last bull market. But in the long run, we know where this is going (up).”
Rager recently highlighted that by comparing Bitcoin in 2020 to the year of its last block subsidy halving, 2016, new all-time price highs should be still a year away or more.
He added that at 24 weeks after the halving, Bitcoin was still “on track” to deliver, echoing more bullish prognoses from quant analyst PlanB.
On the monthly close, PlanB added another “dot” on his stock-to-flow Bitcoin price chart, noting that it was the highest in history and likewise conforming to the model’s predictions.
“Bitcoin is the best performing asset, this year, last 5 years and last 10 years,” he wrote in subsequent comments which were widely shared.
“Even risk-adjusted bitcoin outperforms all other assets, year after year. What’s your reason for not having bitcoin in your investment portfolio?”
Comparative data more than corroborates PlanB’s reasoning. Year to date, Bitcoin is up 87%, while gold has delivered just 23% and the S&P 500 a mere 1.2%.
According to stock-to-flow, astonishing price growth should only accelerate from 2021 onwards, with one incarnation calling for an average $288,000 trading price before the end of the current halving cycle in April 2024.
