Bitcoin is nearing the end of another week of fresh gains which have taken it to near three-year highs—what’s next?
Following days of volatility, BTC/USD looks set to produce a weekly close which could be its second highest on record.
Modern Consensus takes a look at the week’s events and considers what may lie in store for Bitcoin in the coming days. We also produce a markets outlook every Monday, the latest edition of which can be found here.
Bitcoin price seals another week of successes
Bitcoin began Monday on an already bullish note with a rebound above $15,000 from weekend lows of $14,400.
In the wake of the newly-won U.S. election, markets broadly trended up, and Bitcoin appeared to capitalize on existing momentum to retain higher levels. Nonetheless, analysts were concerned that a correction was both needed and incoming, this potentially bottoming out only at around $11,500.
A turnaround in the U.S. dollar currency index (DXY), with which Bitcoin had shown long-term inverse correlation, served to fuel those worries.
In the event, however, significant losses did not materialize during the week. On Tuesday, attention switched to Bitcoin’s latest institutional adoption story, this focusing on billionaire investor Stanley Druckenmiller, who told mainstream media that he both owns and recommends it.
Nevertheless, continued advances for DXY rattled sentiment, with trader Michaël van de Poppe once more eyeing a potential reversal of Bitcoin’s fortunes.
By Wednesday, however, the mood had returned to bullish for many, as BTC/USD retained $15,000 support and went on to hit highs of $15,600. This was coupled with positive signs from Bitcoin’s network fundamentals, which showed that a previous near-record difficulty drop had succeeded in reducing fees, unconfirmed transactions, and block times.
At the same time, Bitcoin’s macro presence continued to grow, with a Chinese bank deal set to offer digital bonds for cash and BTC worth $3 billion.
Perhaps fittingly, it was only a matter of hours before bullish momentum allowed BTC/USD to seal the remaining distance to $16,000. Bitcoin’s highest level since late 2017, volatility immediately ensued once it hit, but as of press time on Friday, $16,000 has broadly held.
Overnight, Bitcoin raced to highs of $16,480 before beginning what appears to be—on lower timeframes—consolidation in the lower half of the $16,000-$17,000 corridor.
“Keep an eye on these key Bitcoin price levels (daily/weekly) from the 2017-2018 highs. They could likely reject before moving higher,” fellow trader Josh Rager explained late Thursday.
“But after $17,149, there isn’t a lot standing in the way before $19,000+.”
PayPal ditches hodler waiting list
What helped Bitcoin tackle its latest psychological resistance barrier was fresh news from PayPal. Previously announcing that it would support Bitcoin and three altcoins from 2021, the company was forced to install a waiting list for customers eager to buy.
That decision was reversed this week, with PayPal confirming that all eligible U.S. customers could now interact with cryptocurrencies via their accounts. Some would even receive email and push notifications about their eligibility in the coming days, an executive said.
With a user base of around 350 million, PayPal is widely seen as a turning point in Bitcoin retail adoption.
“PayPal validating #bitcoin will be the shot that’s heard round the world,” Charlie Shrem, founder of the Bitcoin Foundation, tweeted on Thursday.
As Modern Consensus previously reported, the entry of such corporate heavyweights into the Bitcoin space has one major implication which is not dependent on sentiment. With a large influx of new buyers comes increased demand—but Bitcoin’s supply remains low and constant.
The resulting supply “squeeze” is now a keen point of interest for analysts, who argue that the only logical outcome is for Bitcoin to rise in value against other assets, including, of course, the U.S. dollar.
“There has been an exodus of Bitcoin on exchanges in 2020,” Charles Edwards, founder of digital asset manager Capriole, summarized this week.
“The lack of tradable Bitcoin causes a supply shock to buyers & increases the probability of positive price movements.”
Continuing, Edwards highlighted a chart showing how much the overall BTC supply had dropped in recent weeks.
“This is typical of the start of a bull market. Orange= BTC supply down >5% in 1mth. 89% Bullish,” he wrote on Twitter.