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Bitcoin,  Markets Report

Markets Report: Bitcoin hits 3-year resistance amid warnings of dip to $11,600

A night of significant gains culminates in rejection at $16,000, but a simple supply and demand equation may pave the way for more

Bitcoin is heading towards the end of a hectic week ranging between $15,000 and $16,000 on November 6.

In what has become one of the most remarkable periods in Bitcoin’s history, the largest cryptocurrency has hit levels not seen since the end of its previous bull market in late 2017. 

Modern Consensus takes a look at the week’s events and considers what might lie in store for Bitcoin traders over the weekend and into the next week’s trading. We also publish a weekly markets outlook piece every Monday, the latest edition of which can be found here.

BTC price seals 20% weekly returns

The week began with Bitcoin lingering at just under $14,000, having seen an uptick from nearer to $13,000 support over the weekend.

A brief candle wick through the $14,000 barrier swiftly met resistance, with analysts warning that the multi-year resistance level may continue to pose problems. Cracking it was essential, they argued, in order to open up the gateway to further bullish progress.

As U.S. election day dawned, however, no such progress had appeared, as Bitcoin saw its biggest downward difficulty drop in nine years and returned to $13,500.

Despite this, the mood among analysts was far from bearish—the post-election environment would likely benefit Bitcoin, with CoinShares cryptoasset research analyst Ty Young calling Q4 the quarter of “Bitcoin versus the Fed.”

It was on Wednesday that the market began to reflect this bullish sentiment. As the result of the election remained up in the air, Bitcoin attempted to break $14,000 once more, still falling short of a decisive flipping of resistance.

Thereafter, a trading frenzy gripped the market, which began a bull run by retesting and conquering $14,000.

Thursday saw swift gains take BTC/USD to $15,000, this followed overnight by a top of $15,950.

At the peak, weekly returns topped 20%, with Bitcoin holding onto much of its gains at press time on Friday, trading at around $15,500.

Analyst: Price downturn could hit mid $11,000 range

Grappling with the rapidly-changing environment, some traders see a timely opportunity to temper any overenthusiasm from market participants. 

In his latest tweet, Michaël van de Poppe identifies a “likely” temporary top and reversal for Bitcoin at current levels.

“Basically, we’re at the final resistance zone before ATH. Breaking $16,000-16,500 and I suspect we’ll do that,” he summarized. 

“Reversing here (which seems quite likely) and I’d be eager to buy around the $11,600 area.”

Van de Poppe correctly called the top of Bitcoin’s potential bull run as being $16,000 before it broke $14,000.

markets report bitcoin price
Michaël van de Poppe’s resistance zone on the BTC/USD chart. Source: Michaël van de Poppe/ Twitter

A (bullish) game of supply and demand

Beyond the immediate spot environment, however, the mood still points to an ever higher Bitcoin price—thanks to basic principles of supply and demand. At its heart is revenue data from major corporate Bitcoin buyers.

As Charles Edwards, founder of asset manager Capriole notes, players Square and PayPal are selling more BTC to consumers than it is possible to buy from miners. 

“This is huge. Square is selling double the Bitcoin that is made. …and now Paypal is doing the same,” he tweeted on Friday alongside a comparative chart. 

“Paypal is almost 3X Square. We already know Grayscale is consuming a similar magnitude. This is a Bitcoin supply crisis. Base case: expect huge price moves from Bitcoin.”

markets report bitcoin price
Square and PayPal are selling more than they can take. Source: Charles Edwards/ Twitter

Quant analyst PlanB agrees, on Friday retweeting data showing almost no available BTC for sale on exchanges between $14,000 and its $20,000 all-time highs. By contrast, buyer support lies at $13,000, as it did two weeks ago, implying protection from more serious drops.

While simple in theory, the supply and demand argument for Bitcoin price moves has long formed a central focus for some of the cryptocurrency’s best-known figures. Among them is Saifedean Ammous, author of the popular book, “The Bitcoin Standard,” who often highlights the phenomenon as a means for price gains once the buyer support lines up.

In the short term, however, consensus is building that with the result of Trump vs. Biden will come market volatility across macro assets.

The timing is unknown, but should it occur over the weekend, Bitcoin will begin next week with other features to contend with, among them a “gap” in futures markets which it is historically apt to “fill.”

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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.