Bitcoin starts a new week in a volatile state as the world wakes up to a new U.S. president—what lies in store for cryptocurrency markets?
Modern Consensus takes a look at how Bitcoin might perform in the coming days as markets rally and a supply crisis looms. We also publish a weekly markets summary every Friday, the latest edition of which can be found here.
Bitcoin contends with bearish price forecasts
The weekend proved to be a cap on Bitcoin’s rapid gains from the previous week. As Modern Consensus reported, the largest cryptocurrency kept rocketing upwards, passing $15,000 on Friday and going to hit $15,950—its highest since January 2018.
Such performance both delighted and scared traders, who already assumed that Bitcoin’s trajectory was unsustainable for much longer.
As macro markets took a breather on Saturday and Sunday, Bitcoin saw the first challenges to its winning streak in the form of a sudden dip to lows of $14,400.
Sunday evening provided a resurgence for the bulls, with BTC/USD recovering over $1,000 of its losses to hit $15,650 before calming to linger around $15,500.
Support levels nonetheless remain uncertain at press time—tests of $15,000 continue, while analysts are warning that a deeper retracement is more than possible.
“Decent weekly close, but below $16,000,” Michaël van de Poppe summarized to Twitter followers.
“Levels to watch; $13,700-14,100, $12,800-13,200 and $11,500-12,000 If the market starts to correct.”
Bitcoin in fact sealed its third best weekly close in history, but against the backdrop of such rapid appreciation, misgivings are proving hard to shift. Slightly more bullish was fellow trader Josh Rager, who on Sunday offered an alternative explanation of Bitcoin’s drop to near $14,000.
“Reclaiming the previous range for Bitcoin would just show that this was a marvelous bear trap before sending the price over $16k,” he tweeted late Sunday.
In the event, Bitcoin practically did reclaim that range, with eyes on Wall Street with markets set to open in a matter of hours.
For bulls, a simple supply and demand equation
The picture on macro markets meanwhile looks buoyant as reactions to Joe Biden taking the U.S. presidency roll in.
Despite conspicuously absent commentary from China and Russia, markets are already showing positive inclinations, with Japan’s stock market hitting its highest level since 1991.
“Post-election FOMO rally continues,” markets commentator Holger Zschaepitz wrote on Monday.
“Risk assets cheer Biden win (with) China Tech Index Chinext up >3%. Rising EU and US Futures indicate a good start also in Europe and on Wall St.”
The U.S. dollar currency index (DXY) is also showing signs of a rebound after rechallenging lows of 92 in recent days. This beats its position in August, at the time when Bitcoin first revisited $12,000.
The inverse correlation between DXY and BTC has somewhat lessened recently, but abrupt changes are still apt to impact price movements for Bitcoin.
Zooming out, however, market participants are far more convinced about the benefits of holding Bitcoin as time goes on.
“Did Radical left Socialism win? Has capitalism lost? No way,” Robert Kiyosaki, author of the popular personal finance book, “Rich Dad Poor Dad,” told Twitter followers on Sunday after the Biden announcement.
“Most exciting times ahead. Economy to fail because (the) US dollar, US politics & Social media (are) corrupt. Many new opportunities radical left socialist will never see. Keep buying more gold silver and Bitcoin[.]”
While other prognoses have not been as bold, multiple figures now agree that Bitcoin is headed for new all-time highs, and that these should come in early 2021 at the latest. Joining them at the weekend was quant analyst PlanB, who doubled down on the forecasts of his stock-to-flow Bitcoin price model.
“People ask if I still believe in my model. To be clear: I have no doubt whatsoever that #bitcoin S2FX is correct and #bitcoin will tap $100K-288K before Dec 2021,” he stated.
“In fact I have new data that confirms the supply shortage is real. (In my opinion) 2021 will be spectacular. Not financial advice!”
PlanB was referring to the simple yet important phenomenon that major Bitcoin buyers are taking more coins off the market than miners can produce per block. Logically, without intervention, all that can happen is that Bitcoin increases in price versus other assets.