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Markets Report: Bitcoin Hits $16,400 as Temporary Bearishness Fades Fast

Another bullish start to the week sees Bitcoin in a prime position to tackle three-year highs of $16,500 and more

Bitcoin is bullish again as a new week begins and markets shrug off a weekend reversal — where’s the market heading?

After a wild few days of volatility, Modern Consensus takes a look at what may end up moving the market as BTC/USD regains $16,000. 

For a recap of what happened last week, check out our weekly markets roundup every Friday, the latest edition of which can be found here

Markets climb as USD strength dwindles

Markets worldwide are turning green in a curious countermove to the overarching narrative—coronavirus, lockdown and stifled economic activity. 

On Monday, stocks rose in Asia, with futures in Europe and the US following in step. Japan leads the pack, thanks to the culmination of a decade-long process to approve a new trade agreement, the Regional Comprehensive Economic Partnership (RCEP).

With 15 signatories including China, the RCEP area becomes the world’s largest trading bloc, with import and export duty reduced by up to 92%.

With that, equities have moved ever closer to new all-time highs, providing an eerie paradox to the situation “on the ground.” Many countries have reentered lockdown, travel restrictions remain and economic performance is nosediving once again as a result.

“Another week, another ATH. Global stocks now worth >$95tn, highest value in history,” market commentator Holger Zschaepitz summarized.

Bitcoin and stocks keep climbing this month. Source: Skew

The explanation lies in comments from central banks—more stimulus, more interventions propping up markets including equities, and therefore more pseudo-competition.

Among Bitcoin proponents, that phenomenon remains a heated topic of debate.

“When capital allocation is driven by the plundering of productive people through fiat currency inflation, resource wasting is incentivized and its costs are externalized into the environment,” Robert Breedlove, CEO of Parallax Digital, tweeted over the weekend. 

“By disrupting the central bank, #Bitcoin promises to help restore ecological balance.”

Woo: “Smart money” in on Bitcoin

Statistician Willy Woo meanwhile highlighted institutional investors’ increasing taste for Bitcoin under current market conditions.

“Who has been buying this rally? It’s smart money… High Net Worth Individuals,” he argued last week. 

“You can see the average transaction value between investors taking a big jump upwards. (Over-the-counter) desks are seeing this too. Bitcoin is still in it’s stealth phase of its bull run.”

The bullish case is being supported by a decline in the US dollar in addition to rising stock markets. The US dollar currency index (DXY), with which Bitcoin shows marked inverse correlation, continued to decline on Monday.

At the same time, previously risk-averse sources have begun to turn conspicuously bullish on Bitcoin. The latest is banking giant Citibank, which has given a December 2021 price target of $318,000.

“You look at price action being much more symmetrical over the past 7 years or so (while still huge numbers) forming what looks like a very well-defined channel, giving us an up move of similar timeframe to the last rally,” part of the bank’s analysis, leaked to Twitter, states.

PlanB waits for repeat of 2017 bull run

Citibank’s one-year prognosis beats that of even the more bullish internal price models, specifically that of stock-to-flow, which targets $100,000 next year.

“Patiently waiting for those juicy 60+% monthly #bitcoin returns, like in 2013 and 2017,” its creator, quant analyst PlanB, commented on Twitter on Monday.

PlanB’s Bitcoin monthly returns chart. Source: PlanB/ Twitter

“If you missed 2013 and 2017 bull markets: current #bitcoin price rise to $16K is just a small taste of what will come next. We are just warming up,” another tweet reads.

The immediate outlook for BTC/USD is nonetheless causing discomfort for some traders, who consider the majority of gains to have already come. 

With the pair dipping to $15,800 on Sunday, popular trader Michaël van de Poppe warned that a retest of lower levels would be due should $15,500 support not hold. He followed Tone Vays, who in a video update last week identified a price top of $18,000—no retest of all-time highs would occur, he said.

In the event, highs of $16,400 returned on Monday, just $80 off the previous week’s peak.

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Anthony Bevan is a journalist focusing on disruptive finance and cryptocurrency, along with the changing face of the market as Bitcoin gains mainstream adoption. Journalists covering cryptocurrency for Modern Consensus May hold positions in some of the currencies they write about.