Bitcoin has had a transformative week as all-time highs tumble and institutional investment suggests there’s no turning back — what now?
With BTC/USD up 30% in seven days, Modern Consensus takes a look back at the week’s events and assesses the mood among traders going into the weekend. We also publish a markets outlook every Monday, the latest edition of which you can find here.
Bitcoin prepares for “Roaring Twenties”
Five days can seem like a lifetime in Bitcoin when volatility appears, and this week is perhaps the ultimate example of that phenomenon.
On Monday, traders were mostly concerned about Bitcoin’s ongoing inability to crack resistance at just below $20,000. Despite lingering near all-time highs, selling pressure just increased with time, making the area above $19,500 all but impossible to overcome.
Each attempt by bulls to quash the last remaining resistance zone ended in rejection, followed by a drop which at one point in December had extended to $16,500.
Nonetheless, appetite to continue trying was evident, with BTC/USD refusing to capitulate below $19,000 for long. On Wednesday, the turning point finally came, with $20,000 abruptly hitting in a sudden uptick which didn’t stop there—Bitcoin kept going until $23,777.
With that, a $4,000 daily candle set the tone for Bitcoin’s formative trading week, which many analysts and traders alike are now calling a milestone.
“In the future, the period in U.S. history known as the ‘Roaring Twenties’ will be about Bitcoin,” Gemini exchange co-founder Tyler Winklevoss summarized.
At press time, BTC/USD is trading around $22,600, with volatility still in evidence as price discovery plays out at previously unknown levels.
A look at exchange orderbook data confirms the new frontier for Bitcoin, with firm sell walls absent until $24,000 and buyer support accumulating at $20,000—marking its potential as a possible new floor.
A $60,000 implied price?
As mainstream media catches on to the hottest macro bet of the moment, questions are arising as to why Bitcoin did not ‘disappear’ in 2017 and instead has endured.
The answer, commentators broadly agree, lies in the institutional mindset—big money is betting on Bitcoin, and its holders are bullish.
“There is going to be a generational allocation to this new asset class. The flows have only just begun,” One River Asset Management CEO Eric Peters said on Thursday.
One River is just one of several major new investors to long crypto this month, but at over $1 billion, its prospective contribution outweighs most.
Vying for supremacy are the likes of extant adopters MicroStrategy and Grayscale, the latter still firmly in the lead when it comes to BTC assets under management.
Looking into the future, talk remains about Bitcoin rising to suck capital out of gold markets, fulfilling its informal tagline as “digital gold.” For Preston Pysh, co-founder of The Investor’s Podcast Network, however, the bulls should be looking elsewhere.
“People saying Bitcoin is just replacing gold, total (sic) miss the big mark,” he argued on Thursday.
“This is ALL about bonds. Good luck convince (sic) the people owning 100 trillion (dollars) in bonds – which yield nothing – to keep holding when their future face value & coupons are locked in fixed fiat ‘value.’”
That perspective chimes with MicroStrategy CEO Michael Saylor, the outspoken investor who in September likened his company’s cash surpluses to a “melting ice cube” thanks to inflation and money printing.
Four months later, with MicroStrategy’s valuation up $1.6 billion, he has not changed his tune.
“Bitcoin is the world’s best treasury reserve asset & the emerging dominant monetary network. It is the solution to the store of value problem faced by every individual, corporation, & government on earth,” one of his latest tweets reads.
By hitting $23,600, meanwhile, Bitcoin has managed to reclaim lost ground when it comes to long-term predictions from arguably its most reliable price model, stock-to-flow. At lower levels, BTC/USD seemed to be lacking momentum, but swiftly redressed the imbalance as it has done after every halving event in its history.
For stock-to-flow creator PlanB, however, Bitcoin is far from being as bullish as possible under the model’s rules.
“$23K #bitcoin is nice, but we have some catching up to do with S&P500 since Covid Stimulus / QE,” he argued.
“S&P implied BTC price is $60K.”