Bitcoin begins a new week with a new record under its belt—the highest weekly close in almost three years.
What might the coming few days bring and what should traders look out for? Modern Consensus considers the elements at play in deciding Bitcoin price action this week. We also publish a markets roundup every Friday, the latest edition of which can be found here.
Analysts eye brief retracement to $11,900
The weekend produced even higher highs for Bitcoin as excitement spilled over from last week. Far from being flat, volatility was in evidence as BTC/USD climbed to highs of $13,370.
A subsequent retracement still managed to preserve $13,000 as broad support, resulting in press-time levels of roughly $13,100 on Monday.
Markets’ bullish energy was likely the result of PayPal’s adoption announcement, under which the company will support Bitcoin and three altcoins from next year. Once the news hit, Bitcoin swiftly retook $12,500 and then $13,000.
This week, optimism continues, but traders are wary of assuming that upward trajectory will perform likewise.
“Bitcoin with a 13%+ candle to close out the week. And ever since flipping the 2019 high daily close of $12,920… Bitcoin has closed above it multiple days straight as we work on the highest daily close since Jan 2018,” Josh Rager summarized late on Sunday.
“Pullbacks to be expected but exciting times ahead.”
Fellow trader Michaël van de Poppe held a similar view with regard to lower levels characterizing Bitcoin for the short term.
“This momentum might continue towards $13,500 before a short term top is in. Very good structure in the markets regardless,” he tweeted on Saturday.
A later tweet added that a retest of the previously weekly chart resistance at $11,900 was possible prior to a return to growth. The top then, Van de Poppe reiterated, lies closer to $17,000.
Weekly close upends 3-year resistance
Bitcoin nonetheless succeeded in recording its best weekly close since January 2018, firmly beating $11,900, a level which had previously ended every bull run prior to longer timeframe closes.
The significance of the event was not lost on market participants, even as Bitcoin’s technical fundamentals began to trend downwards.
“This weekly close is more important than you think,” Teddy Cleps of blockchain education resource YellowBlock summarized.
Indeed, despite the risk of a correction in the short term, attention moved decidedly away from technical activity after the PayPal news. As some celebrated what has been a ten-year battle to make PayPal recognize Bitcoin, others believed it was just the first in a domino-effect style chain of adoption moves.
Among them is David Marcus, the co-founder of Facebook’s digital currency program, Libra. Libra originally had the support of PayPal, but the company then withdrew, only to embrace Bitcoin instead a year later. Despite this, Marcus is firmly optimistic when it comes to the future.
“Exciting to see more mainstream financial services players getting on the crypto bandwagon,” he tweeted.
“Many banks now pursuing #BTC and stablecoins support after this week’s announcement by @PayPal. We’re turning a corner.”
Macro investor Dan Tapeiro agreed.
“…Paypal announcement “cover” for other traditional players to get involved,” he tweeted on Friday.
Tapeiro’s motivation was a note to clients from U.S. bank JPMorgan Chase, which he called the “most bullish commentary” the institution has ever produced on Bitcoin.
“Even a modest crowding out of gold as an ‘alternative’ currency in the longer term would imply doubling or tripling of the Bitcoin price from here,” a scan of the note uploaded by Tapeiro reads.
Rumors already abound that more financial institutions are preparing to open up to Bitcoin, following corporate buy-ins which are yet to leave the headlines months after being announced. The expectation is that price action will continue to be sensitive to such adoption moves.
Coronavirus and negative interest rates hurt savers
The alternatives look bleak as Bitcoin booms but macro assets take a turn for the worse this week. Concerns about the spread of coronavirus, the lack of a stimulus deal in the U.S. and next week’s elections are piling pressure on shaky markets.
In Europe, the European central bank is tipped to discuss broadening its own stimulus package this week, in line with the central banks of Japan and Canada.
At the same time, more than 200 German regional banks have begun charging negative interest rates to clients, which vary according to the amount of capital they hold. Banking clients thus now pay to save.
“If you look at it historically, people with savings accounts never had any kind of interesting performance,” Gerhard Michel, a financial coach based in the city of Dusseldorf, told the Associated Press before the pandemic hit.
“The inflation rate ruins any returns on the government bond market or the savings market – and it has always been that way historically. What shocks people now is that people must say the word zero, or even negative, interest.”
