Bitcoin has seen a transformative week, climbing to near record highs and coming all the way back down again—what could the outlook be now?
Modern Consensus takes a look back at this week’s events and considers what the market trajectory might look like over the coming days. We also publish a weekly outlook every Monday, the latest edition of which can be found here.
One week, one trip to near $20,000
Bitcoin began the week firmly within the $18,000 range as a combination of rising stocks and weakness in the U.S. dollar created favorable conditions for safe havens.
Despite a volatile weekend, $19,000 had not yet emerged and remained as upper resistance. By Tuesday, however, the tables had already turned, with Bitcoin rising to clinch another psychological barrier.
For some, this was happening sooner than expected, even within the context of a bull run. Warnings that a reversal was due therefore became all the more prominent as time went on. At the same time, technical factors such as the Crypto Fear & Greed Index continued to reinforce the case for an imminent price correction.
Wednesday thus began the cycle which would culminate in the long-awaited correction that analysts broadly agreed was necessary after the events of the past two months.
After seeing sharp rejection at $19,500, BTC/USD rapidly trended downwards, first towards $19,000. Thereafter, a dramatic 24 hours’ trading saw the market dive to lows of $16,300, marking $3,000 daily losses.
Thursday thus became known as the day that Bitcoin saw its second-highest drop in 2020, this being beaten only by the 60% crash in March.
As if to add insult to injury for bulls, the lower levels almost failed to dent the Crypto Fear & Greed Index’s “extreme greed” rating for price action, implying that further losses could well occur.
BTC top “is not in,” says Brandt
Some commentators are more satisfied with the impact of selling pressure. In a blog post on Friday, major exchange BTCC argued that the shake-up may have done its work and provided a reliable price floor.
“A dramatic drop in Bitcoin’s price may have released the sell-off pressure,” it reads.
“Risk-neutral traders are thinking of whether the Bitcoin bull run would end like it was in 2017. However, Bitcoin seems to be bottomed out during this pullback. Therefore, it is considered a healthy correction before a further breakthrough for $20,000.”
The debate surrounded how similar the 2020 bull run is to three years ago has taken on various narratives, to the extent that each commentator has a different perspective.
The presence of institutional and corporate buying marks a firm contrast to before, but at the same time, psychological desire to sell near the previous $20,000 highs remains clearly visible.
Summarizing the scenario, veteran trader Peter Brandt was ultimately bullish.
“$BTC may correct further but prices have NOT topped,” he underscored to Twitter followers.
Fellow trader Michaël van de Poppe meanwhile highlighted specific areas which should provide definitive support should Bitcoin give up its press-time levels near $17,000. These lie around $15,000, as well as the peak of the upward momentum from last year at near $14,000. Lower than that, he argued, would not be expected.
“$17,900 to $18,200 is the critical level that I do not expect to be breaking at this point,” he added about the potential for gains in the short term.
Beyond trading circles, Bitcoin proponents broadly agree that current levels are a suitable buying opportunity. These include Gemini exchange co-founder Tyler Winklevoss and outspoken RT host Max Keiser, who repeated calls for everyone to simply expose their portfolio to BTC.
“People who say they’ll buy #Bitcoin on a pullback, don’t. The people who buy #Bitcoin when it rallies also buy some on pullbacks,” he argued on Thursday.
“Don’t try to time your buys. Just buy and keep buying no matter what the price.”
As ever, Keiser discouraged anyone from purchasing altcoins, despite the weekly gains of some tokens outpacing Bitcoin considerably. Stellar remains the big winner overall, with seven-day performance up 115%, while Ripple’s XRP is sitting on 73% returns.
While erasing their gains as Bitcoin fell, altcoins remain in line for a fresh resurgence, some argue, with Van de Poppe eyeing a new so-called “altseason” to begin at the start of 2021. By then, however, expectations remain for Bitcoin itself to have broken its all-time highs.