Bitcoin is bouncing back this week as a weekend dip fades and $50,000 edges ever closer—what can traders expect next?
After hitting local lows of $43,000 in recent days, Monday is seeing a renaissance in momentum on Bitcoin markets, with even a major bank flipping bullish on long-term prospects.
Modern Consensus takes a look at the current state of the largest cryptocurrency and considers what might lie ahead as the week gets underway. We also publish a markets summary every Friday, the latest edition of which you may find here.
Bitcoin leaves bears behind
Macro markets in general saw a boost from the United States over the weekend as the House of Representatives and then the Senate approved yet another coronavirus stimulus package worth $1.9 trillion.
A staggering amount of money, the funds will be injected into various sectors of the U.S. economy and include direct payments of $1,400 to eligible Americans.
In what is increasingly feeling like a rerun of March 2020, the mood instantly brightened as the decision was announced, with stocks and the dollar alike gaining ground on Monday. Bitcoin, subdued over the weekend, then began to fight back, climbing to $49,320 on 24-hour gains of over 12%.
Stimulus action is generally heralded as good news by hodlers, who welcome monetary expansion as a key argument in favor of switching to a fixed-supply store of value.
Even swift gains in the U.S. dollar currency index (DXY), traditionally a problem for BTC/USD, have so far failed to halt Bitcoin’s progress.
“Bears had the weekend. I think Bulls will own the week,” popular trader Cantering Clark summarized to Twitter followers late on Sunday.
“Remember, all this selling and yet price actually has not done much. Where is the market trying to go?- down Is it doing a good job of getting there? Not really. Bulls have not entirely lost control.”
That selling had characterized much of last week, but now, it is buying which has returned to the spotlight. As ever, support was led by MicroStrategy, which confirmed that it has added another 328 BTC to its reserves, paying $15 million.
Strong buyer support and a sellers now divesting themselves of BTC at a loss meanwhile fuelled speculation that a deeper price dip is unlikely.
“Even in this correction, the outflow of #Bitcoin from exchanges is still heavy. This means that people are buying their #Bitcoin to hold in cold storage as an investment vehicle and those are not selling,” fellow trader Michaël van de Poppe added, citing data from CryptoQuant.
“We’re still early. In a healthy correction.”
A look at exchange orderbook data from Binance showed that as of Monday evening, major resistance remains at $50,000 and $52,000, with the final seller wall in place at the all-time highs.
Support, by contrast, remains clustered around $42,000, with little appetite between there and the current spot price above $49,000.
Citibank report wows Bitcoiners
Perhaps the biggest surprise in recent days, however, was a report from Citibank, a global lender which has traditionally positioned itself as highly skeptical on Bitcoin.
The publication, dubbed “BITCOIN: At the Tipping Point,” contains language hitherto unheard of from a major bank. Bitcoin, analysts say, has the potential to “become the currency of choice for international trade.”
“There are a host of risks and obstacles that stand in the way of Bitcoin progress,” the report reads.
“But weighing these potential hurdles against the opportunities leads to the conclusion that Bitcoin is at a tipping point and we could be at the start of massive transformation of cryptocurrency into the mainstream.”
Contained in the piece are also quotations from cryptocurrency sources, such as Dave Belter of Blockchain intelligence firm Flipside Crypto, who was unreserved in his choice of words.
“Bitcoin is proof that the way global governments and economic systems have treated money is no longer valid.”
He added: “It is amplifying investor behavior in a way that has never happened previously. It has changed belief systems, and it will be the proof point that our economic infrastructure is more fragile than we have ever known—and a future that is better and more stable is right in front of us.”
In December, Citi analysts downgraded their assessment MicroStrategy as an investment opportunity specifically because it had chosen to put Bitcoin on its balance sheet.