Bitcoin is closing out another week at another all-time high, and the number keeps going up—where will it end?
As 2021 enters its second week, what seems like a lifetime has passed for Bitcoin holders. Price action has arguably never been so volatile, and unlike previous bull runs, the transformation shows no signs of slowing down.
A week of 40% BTC price gains
Bitcoin began its ascent to current all-time highs of more than $40,000 fresh off a hectic weekend of appreciation. Against expectations, BTC/USD charged through $30,000 to hit nearly $35,000 before a series of rejections opened up dramatic downward volatility.
Modern Consensus followed as the largest cryptocurrency hit lows of $27,700 before rebounding back above the $30,000 level. At that point, commentators broadly agreed that the bull run was due a breather and lower levels may get tested one last time—these may even lie below $20,000, they said.
It was at this point that Bitcoin began to truly surprise the market. Instead of copying historical trends by filling in futures gaps or dropping to lower Fibonacci levels, BTC/USD simply kept rising, and each day more or less saw a fresh all-time high.
Thursday was another red letter day for long-term investors, with Bitcoin passing $40,000. In line with behavior earlier in the week, a sudden reversal, during which Bitcoin lost $3,000 in five minutes, was short lived and gains soon resumed.
At press time on Friday, BTC/USD began retreating slightly, back to the $41,500 range after reaching new all-time highs of $41,800. As such, weekly returns were at 40% for Bitcoin, while on Friday alone, investors were up by 8%.
Analyzing the situation, traders were turning suspicious. Given the pace of the price rises, a major correction was now more hotly expected than ever.
“The people in this market are used to 20 to 30% pullbacks but can they handle a 50%+ pullback? Could shake out a few. $50k + seems like the ideal fomo number to bring in new people,” Josh Rager mused to Twitter followers.
“This probably won’t happen, but eventually we’ll see a multi-week 30%+ pullback. Be ready.”
Equally apprehensive was Michaël van de Poppe, who on Friday noted that Bitcoin was approaching the upper Fibonacci extension at $42,500. Bitcoin’s relative strength index (RSI), he added, was at an all-time high on Friday, a further trigger that could portend the start of a correction. Looking at potential entry points, he said:
“$24,000 is an area I’m interested in and the area around $28,000,” he said about potential entry points.
A key metric to watch, he added, was the 21-week moving average, currently far below spot price and traditionally a useful support level in the previous cycle.
Analyst: Major drawdowns “unlikely” as money flows to altcoins
Looking ahead, Philip Swift, creator of analytics resource Look Into Bitcoin, highlighted yet more indicators which demand a “cooling down” in price action but which still did not guarantee that this would occur.
Overall, Swift said, the current bull run has more in common with 2013 than 2017, but unlike those times, market composition is strikingly different and favors retention of higher price levels.
“So while there is some evidence to suggest that Bitcoin may need to cool down soon, it is unlikely that we will see major drawdowns from current price levels,” he concluded in his latest analysis for trading tool Decentrader on Thursday.
“It is increasingly unlikely that price will revisit below $20k again this cycle due to the level of both retail and institutional money trying to enter into Bitcoin.”
Meanwhile, a “more likely” scenario revolved around investors edging away from Bitcoin and instead piling into altcoins with higher growth perspectives based on recent trends.
“The more likely outcome is that we will see market interest gravitate towards Ethereum and Altcoins as traders begin profit-taking on Bitcoin and look to maximize their gains elsewhere. This is unlikely to result in a crash in the Bitcoin price, more likely a period of ranging,” Swift added.
“We are already seeing signs of this, but we expect Ethereum and Altcoins to have a particularly strong 6-8 weeks from here on out. Potentially outperforming Bitcoin for large parts of that time period.”
As Modern Consensus reported, Ether and even XRP have surprised investors with their performance this week.