Bitcoin En Route to $30,000 After Price Falls ~12% in a Day; Here’s Why

Bitcoin plunged roughly 12 percent on Thursday, breaking below critical support levels to target $30,000 for a potential pullback.

The sell-off occurred despite a positive risk-on sentiment across the traditional markets. That prompted analysts to blame a flurry of fundamentals, ranging from the US Treasury Secretary Janet Yellen’s remarks on Bitcoin’s use for illicit purposes to the Deutsche Bank’s survey that concluded the cryptocurrency is in a massive bubble.

“When asked specifically about the 12-month fate of Bitcoin and Tesla — a stock emblematic of a potential tech bubble — a majority of readers think that they are more likely to halve than double from these levels with Tesla more vulnerable, according to readers,” the bank stated in its report.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin breaks below the horizontal support zone. Source: BTCUSD on TradingView.com
Bitcoin breaks below the horizontal support zone. Source: BTCUSD on TradingView.com

A $30,000 Bitcoin

The pessimistic fundamentals flipped Bitcoin’s short-term bullish bias to bearish—technically. The cryptocurrency broke below two critical patterns: the Symmetrical Triangle and the Descending Triangle. Invalidating their lower trendline supports paved the way for Bitcoin to target lower levels—even below $20,000 in the medium-term.

Nevertheless, the market appeared hopeful for a pullback from the levels around $30,000. Two weeks ago, the price floor had capped bears from taking control over the bearish correction sentiment after Bitcoin reversed direction upon rallying to its record high near $42,000. Analysts expect a fractal.

“Two scenarios I’m watching for on Bitcoin,” Jacob Canfield, a lead trader at Signal Profits. “Took a small long on this sell-off, most likely will get stopped out, but worth the RR on the trendline. Will most likely bid the zone heavily right below the wick around $30,000. Should see an aggressive buyback if we reach that level.”

Bullish Catalysts

Part of the upside sentiments takes cues from a rising accumulation sentiment. Grayscale Investments, a New York-based investment firm, purchased 16,244 BTC worth more than $600 million in a day, bringing its net Bitcoin reserves to more than 63,000 BTC, which is worth around $23 billion. Many analysts agree that their buying spree would offset the cryptocurrency’s downside risks in the long term.

Meanwhile, analysts are also optimistic about BlackRock’s recent filing with the US Securities and Exchange Commission (SEC). In it, the firm, which manages $8.7 trillion worth of assets, said that two of its funds are planning to invest in Bitcoin futures.

“BlackRock loves BTC, they manage the equivalent of 8% of world GDP. Bitcoin is 0.6% of world GDP in comparison. This is what happens to Bitcoin price when the High Net Worth get that kind of validation to buy BTC.”

Bitcoin Reclaims $40,000 as Powell Rubbishes Taper Tantrum Woes

Bitcoin didn’t die—all over again.

The flagship cryptocurrency climbed to an intraday peak of $40,127 in the early New York session Thursday, up more than 7 percent.

Its upside move followed a massive bearish reversal at the beginning of this week, wherein the price fell from near $42,000 to as low as $31,100 (data from Coinbase). Many anticipated Bitcoin to continue dipping lower on rebounding US dollar and yields sentiment.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin wobbles inside a bullish continuation structure. Source: BTCUSD on TradingView.com
Bitcoin wobbles inside a bullish continuation structure. Source: BTCUSD on TradingView.com

Nevertheless, the cryptocurrency ducked downside anticipations as investors’ focus shifted on the US President-elect Joe Biden’s stimulus speech and the Federal Reserve Chairman Jerome Powell’s webcast Princeton University.

Stimulus

Mr. Biden expects to unveil plans for a relief package as data showed a rise in the total number of unemployment claims last week—worst since August. The top Democrat wants to spend “trillions of dollars” on cheques for American individuals, unemployment benefits, and green energy solutions investments.

The US dollar index slipped 0.12 percent ahead of Mr. Biden’s address. Bitcoin, which typically trades inversely to the greenback, recovered—as a result. That is due to a narrative that projects the finitely supplied cryptocurrency as a hedge against an oversupplied US dollar with no supply ceiling.

“The correlation between bitcoin and the USD is now -0.15; it’s the lowest reading in history,” said Mati Greenspan, the founder of Quantum Economics. “The inverse correlation is still tiny but the trend is clear. That’s what happens when Bitcoinflies for six months while the dollar sinks like a stone.”

No Taper Tantrum

More powers to Bitcoin came from Mr. Powell, who once for all ended all the speculations surrounding the rumored “taper tantrum” plans. The Fed chair said that he plans to keep easy-money policies in place for the foreseeable future, citing weak growth in the US jobs industry.

The statements appeared amidst growing expectations that a faster-than-expected rebound in the US economy would prompt the Fed to raise short-term interest rates and limit its bond-buying program. But to Powell, the Fed won’t stop easing unless they achieve inflation above 2 percent and maximum employment.

The yields on short-term US Treasurys fell on the news, leading investors to seek better returns in the riskier markets, including Bitcoin.

Bitcoin Logs Revenge Recovery as Lagarde Calls for Global Regulation

Bitcoin prices drifted higher on Wednesday, breaking away from bearish calls as Christine Lagarde raised the need to regulate it at the global level.

In an interview with Reuters, the European Central Bank President said that Bitcoin is a highly speculative asset that has facilitated “some reprehensible activity,” such as money laundering, adding that “there has to be regulation” to control its misuse on an international scale.

“This has to be applied and agreed upon […] at a global level because if there is an escape that escape will be used,” she added.

The statements appeared in the wake of Bitcoin’s sharp decline from its record high this week. The flagship cryptocurrency got sold-off at near $42,000 during the weekend over profit-taking sentiment and crashed by almost 29 percent in afterward sessions. Before that, it had rallied by almost 100 percent in just three weeks of trading.

Bitcoin’s high volatility jittered Ms. Lagarde, who reiterated that the cryptocurrency might never become a currency. She called it “a highly speculative asset” notorious for conducting “some funny business” throughout its 11-year lifetime.

A Recovery, Nonetheless

Nevertheless, Ms. Lagarde’s critical take on Bitcoin was not enough to shake its intraday upside sentiment. The cryptocurrency surged by more than 3 percent to $35,954 less than an hour after the ECB chief’s comments entered the wire, breaking away from its choppy trend that clouded the European and Asian session Wednesday.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin breaks above its 20-day exponential moving average resistance wave. Source: BTCUSD on TradingView.com
Bitcoin breaks above its 20-day exponential moving average resistance wave. Source: BTCUSD on TradingView.com

The BTC/USD exchange rate broke above its 20-day exponential moving average wave (green), signaling its desire to log a rebound towards its 50-day simple moving average (blue), followed by a breakout towards its all-time high above $42,000.

Old fractals showed that Bitcoin maintaining 20-DMA as support is a bullish sign.

Tyler Winklevoss, the co-founder/CEO of US-based cryptocurrency exchange Gemini, hinted that investors bought Bitcoin not to speculate but to break free from the “funny business” performed by centralized exchanges in the name of endless money printing.

“Bitcoin is a movement that is here to stay; it is never going away,” he added, reiterating the cryptocurrency as one the top defensive assets against inflation and fiat depreciation.

Bitcoin Long-Term Trend

More investors are looking at the prospects of additional government spendings in the US, as promised by President-elect Joe Biden to aid the US economy. Meanwhile, the Federal Reserve’s commitment to purchase government and corporate debts while keeping interest rates near zero until 2023 is further diverging investors away from cash-based safe-havens to riskier alternatives like Bitcoin.

“There are many institutional investors who bought $BTC at the 30-32k level,” noted Ki-Young Ju, the CEO of CyptoQuant. “Speculative guess, but if these guys are behind this bull-run, they’ll protect the 30k level. Even if we have a dip, it won’t go down below $28k.”

Image by Peggy und Marco Lachmann-Anke from Pixabay

Bitcoin Flickers Near $35,000 as Bond Yields Drop; A Detailed Outlook

Bitcoin wobbled between gains and losses on Wednesday as traders measured on-chain sell-off signals against the drop in the benchmark bond yields.

The flagship cryptocurrency surged around 0.5 percent to $34,335 ahead of the New York opening bell. It was trading at $35,233 on Coinbase exchange at its intraday high, pointing to bullish attempts to log another bull run towards $40,000.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin feels bearish sentiment under $35,000. Source: BTCUSD on TradingView.com
Bitcoin feels bearish sentiment under $35,000. Source: BTCUSD on TradingView.com

Fundamentals supported a choppy outlook in the cryptocurrency market.

Benchmark Bond Yield Trims Lower

The yield on the US 10-year Treasury note dropped after rising seven days in a row. Its gains appeared amid an auction of new bonds that attracted strong demand from dealers (not investors). They scooped up the majority of $38 billion worth of new government debt, covering 20 percent of the securities. Yields fall as the bond prices rise.

Bitcoin traded higher as the long-term bond yields remained capped under 1 percent after the March 2020 rout. Traders anticipated that the Federal Reserve’s commitment to purchase government debt to support the US economy would send mainstream investors looking for better returns in the cryptocurrency market.

That somewhat turned true as billionaire investors like Paul Tudor Jones and Stan Druckenmiller, alongside mainstream corporations including MicroStrategy, Ruffer Investments, Square, etc., put their capital into the Bitcoin market. That helped the cryptocurrency emerge as a perceived safe-haven asset.

But with the yield back above 1 percent, especially as the President-elect Joe Biden commits greater government spending, along with economic growth, Bitcoin’s potential to champion another upside run looks meager short-term.

US 10-year Treasury note, US10Y, bond yields
US 10-year bond yields dropped two days in a row. Source: US10Y on TradingView.com
US 10-year bond yields dropped two days in a row. Source: US10Y on TradingView.com

Meanwhile, many analysts note that the Fed would cap the Treasury yields because they have committed to support the US economy. The central bank would purchase bonds infinitely until they achieve inflation above 2 percent and maximum employment.

“I don’t think we will see rates move much higher because there is still a lot of demand,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. Meanwhile, he noted that additional stimulus prospects would protect riskier assets.

That may include Bitcoin, given its shoulder-to-shoulder gains with the global stock market in 2020.

On-Chain Bitcoin Data Disappoints

While the long-term outlook for Bitcoin remains stronger, its short-term bias brings forth eerie viewpoints.

Ki-Young Ju, the chief executive officer at CryptoQuant—a South Korea-based blockchain analytics platform, noted that outflows from Coinbase Pro, a US-based digital asset exchange that deals in Bitcoin over-the-counter, dropped significantly.

“Miners are selling, no significant stablecoin inflows, no Coinbase outflows, and 15k BTC flowed into exchanges since yesterday,” Mr. Ju said Tuesday. “We might have second dumping.”

Grayscale Investments, a New York-based trust that deals in Bitcoin, also stopped reporting their cryptocurrency purchases since December 25. The firm was responsible for creating a supply crunch after it raked up a total of 572,644 BTC.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Grayscale Bitcoin Trust holdings. Source: ByBt.com
Grayscale Bitcoin Trust holdings. Source: ByBt.com

“When inflows start coming in, indicating institutional demand, that’s when Bitcoin could start to rally upwards again,” said market analyst Joseph Young. “Worth observing.

Grayscale reopened on Tuesday after the holiday season.

Stellar Leads Crypto Gains as XLM Rallies by 49%; Pullback Ahead?

Stellar Lumens’ native token XLM was among the biggest gainers in the cryptocurrency market in the previous 24 hours, rising by roughly 49 percent in the US dollar-pegged markets.

The XLM/USD exchange rate reached an intraday high of $0.313 after dropping to as low as $0.20 in the previous session. Traders flocked into the Stellar token owing to a general recovery across the crypto assets that saw top coins, including Bitcoin, Ethereum, and XRP, emerging from their respective session lows.

Fundamentals

Stellar primarily benefited from its accessible upside fundamentals. The open-source blockchain project lately emerged as a viable alternative to its top rival Ripple Labs. Ripple, a San Francisco-based payment firm, landed in a legal controversy with the US Securities and Exchange Commission (SEC) over the alleged illegal sale of its native token XRP.

Meanwhile, traders assessed Stellar entering a high-profile partnership with the Ukrainian government to digitize their national currency.

“We look forward to working with the Ministry and other stakeholders to digitize the hryvnia, to bring Stellar-based tools and services to the people and businesses of Ukraine, and to introduce new partnership opportunities in Ukraine to businesses in the Stellar ecosystem,” Denelle Dixon, CEO and executive director of the Stellar Development Foundation, said in an accompanying press release.

The prospects of greater Stellar integration into a country’s digital finance ecosystem partially allowed XLM to absorb the sell-off pressure during the weekend and Monday session. That may have helped the token log an attractive recovery rally on Tuesday.

XLM Technical Outlook

The XLM/USD exchange rate on a four-hour chart showed the pair in a short-term corrective downtrend following its 274 percent rally from the December 23 low of $0.11.

In doing so, it appeared to have formed a Bullish Flag, a small continuation pattern that appears when an asset consolidates before resuming its move to the upside. The price typically breaks out by as much as the length of the previous rally, otherwise known as “Flagpole.”

Stellar Lumens, XLMUSD, XLMBTC, Bitcoin, XRP
Stellar logs the best recovery rally in the last 24 hours among top-cap coins. Source: XLMUSD on TradingView.com
Stellar logs the best recovery rally in the last 24 hours among top-cap coins. Source: XLMUSD on TradingView.com

That puts XLM/USD’s breakout target near $0.535.

Bitcoin Paints Predictive Death Cross as Price Tops Out Near-Term

There’s an ominous “Death Cross” maturing on the Bitcoin price chart, foretelling a grim outlook for the cryptocurrency soon.

The benchmark cryptocurrency has tumbled aggressively after forming a record high near $41,986 (data from Coinbase) on Friday. At its recent low, it was trading at $30,100 but managed to instill hopes of a bullish revival as traders bought the level, pushing prices above $35,000 as of this Tuesday.

Nevertheless, the intermingling between Bitcoin’s short- and long-term moving averages on a four-hour chart has raised the alarm about a potential bearish continuation ahead.

The cryptocurrency’s 20-period EMA, viewed as a tracker of short-term trends, slipped below its 50-period SMA, seen as an indicator of slightly long-term price patterns. That led to the formation of the Death Cross, a pattern that traders view as a signal to increase their short exposure in the market.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin forms the Death Cross pattern on the 4H chart. Source: BTCUSD on TradingView.com
Bitcoin forms the Death Cross pattern on the 4H chart. Source: BTCUSD on TradingView.com

The point where the two moving average waves converge in the chart above capped Bitcoin from extending its rebound move higher. That showed a strong technical confluence of two resistance levels, increasing BTC/USD’s potential to fall short while attempting to close over it.

Additional Factor

Part of the reason was a wobbling US dollar.

The greenback rebounded sharply from its two-year low in the past six days, pushing an inversely-correlated Bitcoin lower. On Tuesday morning, the US dollar index pared a small portion of its gains, lifting BTC/USD higher. But as the US session neared, the trend showed signs of reversing, resuming sell-off pressure in the Bitcoin market.

US dollar index, DXY
US Dollar Index undergoes modest correction after testing its historical resistance range. Source: DXY on TradingView.com
US Dollar Index undergoes modest correction after testing its historical resistance range. Source: DXY on TradingView.com

Overall, a confluence of dollar and death cross MA resistances kept Bitcoin from extending its retracement.

Dissenting Bitcoin Bears

Investors nonetheless expected the dollar to resume its downtrend on prospects of additional stimulus from the incoming Joe Biden administration in the US. More greenback liquidity has earlier helped Bitcoin rising from as low as $3,858 to a record high above $41,000 in just nine months of trading.

“This is a big head fake before Biden’s Covid/Stimulus plan,” said Jason A Williams, an independent market analyst, and author.

“HODL. Zoom out. Bitcoin is still up only,” he added.

Ethereum Analyst Predicts Record High against Eerie Bearish Setups

Ethereum’s native token ETH fell by more than 20 percent from its session high of $1,350 on profit-taking sentiment. While technical indicators point to further correction lower, one analyst believes the second-largest cryptocurrency could hit its record high levels in the sessions ahead.

The pseudonymous entity rested his bullish setup on one condition: that the ETH/USD exchange rate closes above the $1,116-$1,140 range first. Then only, the pair would be able to confirm an extended rebound towards $1,420, its all-time achieved in January 2018.

Ethereum, ETHUSD, ETHBTC, ETHUSDT, cryptocurrency

Ethereum trade setup, as presented by KongBTC. Source: ETHUSD on TradingView.com

Rising Wedge

ETH/USD formed a local support level near $1,000 ahead of the US trading session on Monday. The pair experienced a pullback albeit meager trade volumes that suggested traders may want to continue selling the Ethereum token further. Meanwhile, it appeared that ETH/USD’s possibility of logging a full-fledged retracement lies near $919.

That is because of a technical indicator known as the Rising Wedge. In retrospect, it is a bearish reversal pattern that appears when an asset trends upward while leaving behind a sequence of higher highs and higher lows. Ultimately, the price breaks out of the pattern to the downside, falling to as low as the maximum Wedge’s height.

Ethereum, ETHUSD, ETHBTC, ETHUSDT, cryptocurrency

Ethereum Rising Wedge setup sets breakout target near $919. Source: ETHUSD on TradingView.com

Ethereum formed a similar Wedge as it jumped from $924 to $1,420 in the first week of January. Meanwhile, the cryptocurrency broke out of the pattern at around 0000 GMT on Monday, accompanied by a spike in volumes. That raised its possibility to reach the Wedge target near $919.

ETH Pitchfork Pattern

More bearish warnings came from Josh Olszewicz, an independent cryptocurrency market analyst. The chartist highlighted his go-to pitchfork pattern, showing that Ethereum might have topped out its recent high. That indicated an extended downside correction for ETH/USD.

“[The pair] is looking for a dip to [middle line], 200-day EMA, and yearly pivot over next few months ~500-530,” said Mr. Olszewicz.

Ethereum, ETHUSD, ETHBTC, ETHUSDT, cryptocurrency
Ethereum Pitchfork setup sets the downside target near $500. Source: ETHUSD on TradingView.com
Ethereum Pitchfork setup sets the downside target near $500. Source: ETHUSD on TradingView.com

The bearish analogies appeared despite a growing bullish bias for the cryptocurrency industry as a whole.

With US president-elect Joe Biden confirming that his administration would expand the size of their coronavirus stimulus package by trillions of dollars, traders anticipate the US dollar would lose its value further. As a result, safe-haven assets like gold and Bitcoin would continue their uptrend.

Ethereum, which correlated positively to the Bitcoin market, expects to rise higher alongside the top cryptocurrency.

Could Bitcoin Reclaim $40,000? The US Dollar Index Has An Answer

Bitcoin logged its worst plunge since March in the previous three sessions, stoking concerns among traders that its overheated price rally is beginning to lose steam.

The flagship cryptocurrency plunged 5.18 percent during the weekend and extended its correction by an additional 7.29 percent to $35,388 by 0916 GMT on Monday. At its intraday low, it was changing hands for $32,265. On the whole, the downside move marked Bitcoin’s biggest three-day decline since March.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin’s first major correction after its 100%-plus rally in three weeks. Source: BTCUSD on TradingView.com
Bitcoin's first major correction after its 100%-plus rally in three weeks. Source: BTCUSD on TradingView.com

Why Bitcoin Plunged

At the core of the cryptocurrency’s bearish correction was profit-taking, led by concerns ranging from its overbought status, the recovery in the US dollar index, and rising yields on the US 10-year Treasury benchmark note.

Traders appeared to have reallocated some of their profits into the cash and bond markets, primarily as the Federal Reserve hinted to reduce the size of its bond-buying program by January 2022, as per the minutes of their December meeting released on Wednesday.

That coincided with Bitcoin approaching its all-time high level above $41,000 two days later, creating ideal profit-taking and capital reallocation opportunity for traders.

“Time to take some money off the table,” Scott Minerd, the chief investment officer with Guggenheim Investments, said in a tweet Monday. “Bitcoin’s parabolic rise is unsustainable in the near term.”

Nevertheless, the latest Bitcoin price correction hasn’t deterred traders and investors from focusing on the cryptocurrency’s long-term outlook. That is due to a flurry of fundamental catalysts that expect to provide a backstop for bulls.

Additional Stimulus

The Fed will turn to ‘taper tantrum‘ only after the US economy recovers to levels it seems as satisfactory. Chairman Jerome Powell has already admitted that they want to push the inflation rate above 2 percent. He has also said that his office would keep buying bonds at the same pace until they see substantial recovery in the US labor market.

Nevertheless, a broader recovery would only come after the US government’s commitment to providing additional fiscal stimulus. President-elect Joe Biden has confirmed that his first days in the White House would focus majorly on boosting the aid by trillions of dollars.

The prospects of a ballooning fiscal deficit would pressure the US dollar lower, at least in the medium-term. Traders and investors have positioned Bitcoin to behave as a safe-haven against the greenback’s potential decline. That partially explains its recent correction, which perfectly coincided with the dollar’s recovery in the last three days of trading.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
US dollar index targets key resistance areas to confirm a bullish reversal. Source: DXY on TradingView.com
US dollar index targets key resistance areas to confirm a bullish reversal. Source: DXY on TradingView.com

The US dollar index, which measures the greenback’s strength against a pool of foreign currencies, is now breaking out of its falling channel to the upside. It now targets two critical resistance areas, as shown in the chart above, expecting to roll back to the downside on bearish fundamentals.

“Bitcoin is the highest-beta beneficiary of the liquidity-driven quarantine+stimulus trade,” TDA Network’s Anchor Oliver Renick. “COVID curves peaking and [monopoly] handing off to fiscal is [a] more [important] catalyst.”
That puts the cryptocurrency back en route to $40,000.

Don’t Sell Your Bitcoin and Ethereum on RSI Warnings: Analyst

A recent volatile run-up in the Ethereum and Bitcoin markets has exceeded their value into “overbought” regions, as per Relative Strength Indicator (RSI).

In retrospect, the RSI is a momentum indicator that measures the magnitude of recent price changes in an asset to determine its overbought or oversold conditions. Displayed as an oscillator, it can have a reading anywhere between 0 and 100, with 30-70 serving as a neutral area. Traders perceive RSI above 70 as overbought—and below 30 as oversold.

They further treat an overbought RSI as their cue for a potential trend reversal or a price pullback.

Bitcoin’s RSI following its jump from $3,858 in March to above $41,000 in January has surged to 89.48 on its daily chart. Meanwhile, the same reading for Ethereum is at 89.36 after its $1,335 percent move within the same period.

Ethereum, ETHUSD, ETHBTC, ETHUSDT, cryptocurrency
Ethereum trades near its yearly high as its RSI signals topping out. Source: ETHUSD on TradingView.com
Ethereum trades near its yearly high as its RSI signals topping out. Source: ETHUSD on TradingView.com

Defying Traditions

Typically, the overextended rallies in both the assets have prompted some analysts to see deeper price corrections ahead, with some even forecasting a 50 percent drop from their respective session tops. Nevertheless, one analyst believes that traders should not sell their Bitcoin and Ethereum based on RSI warnings.

Koroush AK, who successfully predicted Bitcoin’s record high in 2020, says RSI is not a good indicator when it comes to measuring “parabolic uptrends.” Instead, it works fairly well in determining movements in ranging markets.

The statements came as Ethereum’s and Bitcoin’s RSIs continue to form higher highs despite staying in an overbought zone on weekly charts. That reflected a greater euphoria among traders in the cryptocurrency market, especially in the wake of booming institutional awakening about Bitcoin’s anti-inflation features.

Institutions Offseting RSI Fears

Observers believe that institutions are buying the local price dips. CryptoQuant CEO Ki-Young Ju further highlighted the trend by proving a larger BTC outflow from Coinbase Pro into newly-created wallets.

The analyst noted that the recipient addresses were custodial in nature, pointing to a rise in over-the-counter deals even as Bitcoin surged above $30,000.

“Looking at the latest Coinbase outflow, possibly OTC deals, I think we can estimate their PNL,” he tweeted on Friday. BTC surged 24% since Jan 2. If you were institutional investors, would you be satisfied with 24% PNL for Bitcoin? Bullish.”

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Coinbase Pro OTC deals have returned 24 percent gains to institutional investors. Source: CryptoQuant
Coinbase Pro OTC deals have returned 24 percent gains to institutional investors. Source: CryptoQuant

That partially explains why retail traders ignored RSI warnings in the previous daily sessions. But the question remains how far the ongoing rally in both Ethereum and Bitcoin markets could last? One analyst believes they will correct based on the same RSI alerts.

“RSI has called this move better than any other traditional tool and it called for a Mega move,” the pseudonymous entity said in response to Mr. AK.

Bitcoin Hits Record Levels Above $41K; Massive Corrections Ahead?

Bitcoin looked to end its first official week on a strong note as its price claimed another record high this Friday.

The benchmark cryptocurrency soared above $41,000 for the first time since its inception, hitting an all-time peak of $41,499 before correcting lower. Its gains appeared shortly after the European equities reported profits in early dealings, hinting that traders took their cues from a bullish risk-on sentiment.

Since November, the continent’s benchmark Stoxx 600 opened 0.3 percent higher as it stayed on track to finish its best week. Meanwhile, the MSCI index, which tracks developed market equities, jumped 0.3 percent, also on track to record its best week but since 2018.

EUR/USD declined 0.30 percent. Around the same time, Bitcoin’s market capitalization reached an unprecedented $749 billion level—almost near Tesla’s valuation.

Bitcoin Fundamentals

Gains across riskier assets appeared after Democrats won key seats in Senate run-off elections this week in Georgia. The victories gave the blue political party control of both Congress houses. For investors, that means an increase in fiscal stimulus measures to aid Americans through the coronavirus pandemic’s economic aftermath.

“This is probably the best news for the economy since vaccines were approved,” Adam Kurpiel, head of rates strategy at Société Générale, said in a note.

Meanwhile, investors also assessed lesser political uncertainty after President Donald Trump agreed to transfer powers “orderly” to his successor Joe Biden. Mr. Biden will take oath as the 46th US president on January 20.

Bitcoin analysts have predicted that Mr. Biden’s administration’s larger stimulus measure might usher in inflation alongside economic growth. They have projected the cryptocurrency as an anti-inflation set that would rise higher as the US dollar loses its purchasing power over time.

“Now that Trump has conceded, we can expect Covid Lockdowns to get far worse in the U.S. just like they have in Europe in recent days,” said independent market analyst Elixium. “The Biden [administration] will make very srs attempts to get places like Texas & Florida in Full Lockdown. Bullish for Bitcoin, Bearish for USD.”

Correction Call

But as retail traders raised their bids for Bitcoin against supportive fundamentals, the technicals seem to suggest a massive correction ahead. The cryptocurrency has reached its most overbought levels on all its longer-timeframe charts, amounting to an unavoidable neutralization led by bear-induced sell-offs.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin enters overheated territories, risking sell-off attempts by bears. Source: BTCUSD on TradingView.com

Should a correction occurs, BTC/USD would test $40,000 as its interim support while keeping an eye on $36,000 as its primary downside target.

Bitcoin Hits $38,000 as Democratic Win Boosts Stimulus Sentiment

Bitcoin rallied continued during the European session Thursday as traders ignored Washington’s political unrest to focus instead on the potential for higher sovereign spending.

The BTC/USD exchange rate established a new record high of $38,180, adding 10 percent to what has been a relentless uptrend in the last four quarters. While the pair pared some of those gains later, the overall enthusiasm across the risk-on markets suggested it would continue posting gains in the US session ahead.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin closes above $38,000 in the latest intraday rally. Source: BTCUSD on TradingView.com
Bitcoin closes above $38,000 in the latest intraday rally. Source: BTCUSD on TradingView.com

Investors’ bullish outlook on Bitcoin improved further after Democrat Jon Ossoff’s victory in the second of two Senate run-off elections in Georgia. The seats handled control of the US senate to President-elect Joe Biden’s administration. That raised the hopes for additional stimulus for the US economy, beginning with a $2,000 worth of direct aid to deserving Americans.

A joint session of Congress Thursday morning also affirmed a clear win for Mr. Biden. Meanwhile, outgoing President Donald Trump agreed to an “orderly transition” of power after denying it since Biden’s lead in the US presidential race.

“The expectation is now we’ve avoided a gridlock, and more fiscal support will be available to the economy through this coming year, rather than less,” Christopher Smart, chief global strategist at Barings, told the Wall Street Journal.

Bitcoin To The Moon

So it appears, Bitcoin traders reacted optimistically to the overall political update.

The cryptocurrency surged by almost 900 percent after bottoming out in March 2020 at below $4,000. Its gains surfaced primarily after the Federal Reserve announced an open-ended government and corporate debts purchasing program and decided to cut benchmark lending rates to near-zero.

Meanwhile, the US government approved a $2.3 trillion stimulus package for American households and businesses suffering from the coronavirus pandemic’s economic aftermath. In December 2020, the White House passed another $900 billion worth of aid against the Democrats’ demand for “at least $2 trillion.”

“When it comes to the young people’s hands they are going right to their accounts,” said Mike Novogratz, CEO of Galaxy Investment Partners, on stimulus driving market gains. “One of the most unique things last time was seeing how many people bought Bitcoin with the exact amount of stimulus. Boom. Boom.”

Institutional investors are also gaining exposure in the Bitcoin market, believing that the strategy would protect their portfolio as their cash reserves lose value. Hedge fund veterans including Paul Tudor Jones and Stan Druckenmiller bought a small portion of Bitcoin in 2020.

Meanwhile, companies like MassMutual, MicroStrategy, Square, Ruffer Investments, also purchased Bitcoin against their fears of inflation.

Ripple’s XRP Swells 40% Despite Delisting Woes; Dead Cat Bounce?

Ripple’s native token XRP was among the best performers in the cryptocurrency space even as its delisting across exchanges picked momentum.

The XRP/USD exchange rate surged by more than 40 percent on a 24-hour adjusted timeframe, hitting an intraday high of $0.328. Measured from its bottom of $0.17 from December 30, the pair was trading almost 94 percent higher, signaling a successful pullback following its 82 percent crash from its yearly peak of $0.92.

Ripple Labs, XRP, XRPUSD, XRPBTC, cryptocurrency
Ripple rebounds with moderate volume. Source: XRPUSD on TradingView.com
Ripple rebounds with moderate volume. Source: XRPUSD on TradingView.com

XRP Fundamentals

The Ripple’s gains primarily appeared in the wake of a market-wide price rally across the cryptocurrency market. Traders raised their bids on all the top-cap coins after Bitcoin logged record highs above $37,500. Altcoins usually do better after Bitcoin tops out. That partially explains why XRP surged.

Meanwhile, the token also surged as Ripple signed a deal with Saudi Arabia’s central bank to innovate their payment infrastructure with blockchain solutions. The news signified Ripple’s expansion plans outside the US, especially as it faces a lawsuit from the Securities and Exchange Commission (SEC) over alleged illegal securities’ sales.

The potential court battle has prompted crypto brokers exchanges to drop XRP support from their services. They include Voyager Digital, Grayscale Investments, Blockchain.com, Coinbase, Binance, and OKCoin. Bitwise Assets Management also liquidated $9.3 million from their crypto index fund.

A group of XRP investors has also sued SEC’s Chairman Jay Clayton, alleging personal hostility over his enforcement action against Ripple.

Dead Cat Bounce

XRP’s rise, despite its fundamentally bearish bias, has raised concerns about a fake rebound. One pseudonymous analyst tweeted on Thursday that he sees the XRP/USD’s pullback as “dead cat bounce” — a small, brief recovery in the price of a declining asset.

Ripple Labs, XRP, XRPUSD, XRPBTC, cryptocurrency
Ripple’s potential price action, as illustrated by IncomeSharks. Source: XRPUSD on TradingView.com
Ripple's potential price action, as illustrated by IncomeSharks. Source: XRPUSD on TradingView.com

“XRP at strong horizontal support, but even if it holds the upside in buying here is minimal,” the analyst said. “It took years for it to move, and it could be years for it to recover. There are much better assets to trade, in my opinion. The odds of $0.50 to $1.00 are even lower than before.”

Meanwhile, independent analyst Michaël van de Poppe stated that XRP/USD would need to break above the $0.31-$0.34 range to confirm a steady bullish bias. Until that happens, the pair’s likelihood of facing more sell-offs would increase.

Bitcoin Jumps as Democrats Lead Georgia Runoff Elections; What to Expect?

The intraday returns on the Bitcoin spot market rose above 2 percent as Democrats took the lead in Georgia’s runoff elections.

By the late Asian trading session on Wednesday, the flagship cryptocurrency had surged to another record high of $35,868, according to Coinbase crypto exchange, up 7.54 percent from its intraday low of $33,352 at around midnight UTC.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin trades higher in an Ascending Channel pattern. Source: BTCUSD on TradingView.com
Bitcoin trades higher in an Ascending Channel pattern. Source: BTCUSD on TradingView.com

A downright bearish US dollar sentiment served as the primary catalyst behind Bitcoin’s gains. The greenback extended its week-to-date decline further on Wednesday by falling 0.15 percent, prompting speculators in the cryptocurrency market to raise their bids. Bitcoin generally trades inversely to the US dollar index in the medium-term.

Georgia Elections

The Bitcoin-Dollar sentiment took cues from the Senate elections in Georgia. Democrat Raphael Warnock defeated incumbent Republican Kelly Loeffler in one of the runoffs. Meanwhile, the second contest remained unpredictable.

Democratic wins in both seats would divide the US Senate equally between them and the Republicans. Meanwhile, an event of a hung vote on legislations ahead would allow Vice President-elect Kamala to Harriss the right to provide a decisive voice in the Senate.

Investors believe that would pave the wave for Democrats to pass more fiscal packages, beginning with a recent proposal of aiding Americans with a $2,000 stimulus check. Bitcoin traders treat federal and government spending as bearish for the dollar and bullish for their crypto holdings, citing scarcity.

The Bitcoin Bias Ahead

Bitcoin’s uptrend received a boost from a flurry of fundamentals other than a potential “blue sweep” in Georgia.

Singapore-based investment fund Three Arrows Capital reported in its filing earlier this week that it has increased its exposure in the Bitcoin market via Grayscale Bitcoin Trust. It now holds 38,888,888 GBTC shares worth more than $1.1 billion.

Meanwhile, strategists at JPMorgan & Chase raised their Bitcoin price target for the future to at least $146,000, citing its growth against the rival safe-haven asset, gold.

Skybridge Capital’s founder and renowned hedge fund manager Anthony Scaramucci also pitted Bitcoin as a superior contender to the precious metal, stating that it is “easier to store, harder to steal, and more portable.”

The statements appeared as Mr. Scaramucci launched a crypto-based investment fund for institutional investors.

Overall, the narrative favored Bitcoin’s bullish bias. But there were still a few warnings concerning the cryptocurrency’s “overbought” status. Its weekly RSI is above 95 that amounts to either a bearish price correction or an extended consolidation move.

Bullish Continuation Pattern on Ethereum Predicts Price Over $1,500

Ethereum has the potential to extend its ongoing upside move towards or above $1,500.

The second-largest cryptocurrency broke above a consolidation price channel on Wednesday, breaking its upper trendline on surging volumes. So it appears, the channel is an Ascending Triangle that traders perceive as a bullish continuation indicator.

An Ascending Triangle structure develops when an asset fluctuates between a horizontal resistance line to form swing highs and a rising trendline to form swing lows.

Therefore, if the asset trades upward before forming the said structure, its potential for continuing the trend higher increases following a breakout move through the horizontal line; Typically, the breakout target lurks near the level at a distance equal to the length of the previous uptrend move, otherwise known as “Flagpole.”

The Ascending Triangle Setup

Ethereum formed a similar structure following its explosive move from $757 to $1,169. The Triangle pattern established a horizontal resistance line near $1,127. The ETH/USD exchange rate broke the level to the upside during the European session Wednesday, reaching an intraday high of $1,170.

Ethereum, ETHUSD, ETHBTC, ETHUSDT, cryptocurrency
Ethereum enters the resistance range with a history of undergoing sell-offs. Source: ETHUSD on TradingView.com
Ethereum enters the resistance range with a history of undergoing sell-offs. Source: ETHUSD on TradingView.com

The price entered the colored region, as shown in the chart above. It held the history of sending ETH/USD lower due to higher selling sentiment. So it appears, traders with a short-term outlook profited from the pair’s intraday top on Wednesday as well. Nevertheless, the price remained above the horizontal line, signaling its potential to extend its breakout move upward.

Ethereum to $1,500

A further break above Ethereum’s session high of $1,168 could prompt traders to eye the Ascending Channel’s breakout target. The flagpole height before the pattern’s formation is around $395. That roughly puts ETH/USD en route to over $1,500.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin and Ethereum trade volumes near best single-day peaks. Source: itBit
Bitcoin and Ethereum trade volumes near best single-day peaks. Source: itBit

More evidence of a potential Ethereum rally comes from its retail demand. Nugget News Founder Alex Saunders shared a single-day Bitcoin and Ethereum volume chart sourced from itBit, a digital asset platform owned by PayPal’s crypto services provider Paxos. He said:

“Retail demand is absolutely sky rocketing for BTC and ETH with on track to smash their highest single-day volume of $110M. The general public is catching the magic internet money bug, just as a wave of institutional money has begun pouring in.”

Bitcoin Holds $31,000 Ahead of Georgia Elections; What to Expect?

Bitcoin prices slipped lower Tuesday but maintained a strong foothold near critical support levels in the $30,000-31,000 range as traders awaited the outcome of Georgia’s runoff elections.

The flagship cryptocurrency slipped 0.75 percent ahead of the New York opening bell, wobbling between two extreme levels wherein $32,890 was intraday high, and $29,891 was intraday low. Most recently, it was trading for around $31,900, suggesting that traders remain in a short-term bias conflict.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin is trading between gains and losses ahead of the Georgia elections. Source: BTCUSD on TradingView.com
Bitcoin is trading between gains and losses ahead of the Georgia elections. Source: BTCUSD on TradingView.com

Georgia Race

So it appears, investors are closely monitoring the two electoral races in Georgia. If Democrats win both seats, it will make it simpler for President-elect Joe Biden to pass additional fiscal stimulus without any political resistance from Republicans.

More fiat liquidity expects to push the US dollar lower against strong and emerging currencies. Meanwhile, it could also raise Bitcoin’s appeal as a safe-haven asset, given the cryptocurrency’s 300 percent bull run in the last 12 months—under similar circumstances.

More bullish outlooks could come surface if Mr. Biden increases corporate taxes and raise regulations. That would leave investors with corrective stocks and limited hedging alternatives—thanks to already-depreciating bond yields and the US dollar value. Bitcoin expects to benefit from such uncertainty, as well.

However, a Republican win would create a standoff over additional stimulus proposals. At best, that would slow down Bitcoin’s uptrend growth, especially as it prepares for a run-up towards $35,000 over increasing institutional interest.

Bitcoin 4H Chart

The technical outlook on the Bitcoin four-hour (4H) chart favors bulls. While the cryptocurrency holds $30,000 as its primary support level, it is also trading inside what appears to be a Bull Flag pattern. It serves as a bullish continuation indicator.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin consolidates lower to prepare for another leg upward. Source: BTCUSD on TradingView.com
Bitcoin consolidates lower to prepare for another leg upward. Source: BTCUSD on TradingView.com

Based on the technical indicator, the BTC/USD exchange rate could break out of the range to the upside. The height of the breakout would be as much as the height of the flagpole formed before the consolidation channel. It is around $5,000-long.

That puts BTC/USD en route to $35,000-36,000 in the short-term.

Conversely, if an extreme corrective sentiment invalidates the Bull Flag, the pair risks falling to its last support range of $26,500-27,500. The dovish FOMC minutes coming out on Wednesday should avoid that scenario nonetheless.

Stellar’s XLM Soars 40% After Ducking XRP Correlation; What’s Next?

Stellar’s native token XLM surged by approx 40 percent in just three days of trading, becoming one of the best top-cap cryptocurrencies based on week-to-date returns.

The XLM/USD exchange rate reached $0.178 on Tuesday, its best level in three weeks, after showing signs of decoupling from XRP, a rival cryptocurrency issued by San Francisco-based Ripple Labs. Its founder Jed McCaleb left in July 2013 to launch Stellar. The two cryptocurrencies have stayed positively correlated ever since.

XLM Breakout Ahead?

The proximity slowed down substantially after the US Securities and Exchange Commission sued Ripple for allegedly selling illegal securities. Traders dumped XRP in panic in December 2020, which dragged along XLM lower as well. As of December 23 last year, XLM/USD was trading at $0.11.

The pair also plunged amid worries that the SEC would also target Stellar and its founders. Later, many experts argued that XLM and XRP are different altogether, a reason why the New York Department of Financial Services (NYDFS) approved Paxos Trust Company’s request to use it for over-the-counter trading in 2017.

“XLM is always very correlated to XRP, which explains the massive dump over the past weeks,” stated a pseudonymous analyst on Twitter, adding that the cryptocurrency looks ready to undergo a breakout move.

Stellar, XLMUSD, XLMBTC, cryptocurrency
Stellar is trading inside a falling wedge pattern. Source: XLMUSD on TradingView.com
Stellar is trading inside a falling wedge pattern. Source: XLMUSD on TradingView.com

The analyst referred to a bullish reversal structure to explain his upside bias for XLM. As shown in the chart above, the cryptocurrency showed signs of breaking out of a so-called “Falling Wedge” pattern. Technically, the move should take XLM up by as much as the Wedge’s height, which is $0.084.

That roughly puts the Stellar token en route to $0.25, up 50 percent from the breakout point.

Digitization Commitments

The shift from XRP to XLM also occurs as the Ukrainian government hires the Stellar team to digitize its national currency Hryvnia.

“The Ministry of Digital Transformation is working on creating the legal environment for developing virtual assets in Ukraine. We believe our cooperation with the Stellar Development Foundation will contribute to the development of the virtual asset industry and its integration into the global financial ecosystem,” said Oleksandr Bornyakov, Deputy Minister of Digital Transformation for IT Development.

The extent to which XLM would power the Stellar-Ukraine project remains unclear. But the news appears enough to put traders in a jubilant mood. That explains XLM’s rise of more than 30 percent in the last 24 hours.

Ethereum Wobbles Around $1K in Volatile Trading; What’s Ahead?

Ethereum dropped heavily during the thinly-traded early European session Monday, breaking below $1,000 from its three-month high of $1,168.99.

The second-largest cryptocurrency briefly tumbled to $886 due to profit-taking among daytraders. Meanwhile, its downside correction caused long liquidations worth nearly $330 million across all the crypto derivatives exchanges. That may have prompted overleveraged traders to sell their existing ETH holdings to cover their margin calls, creating further downside pressure on its value.

Ethereum, ETHUSD, ETHBTC, ETHUSDT, cryptocurrency
Ethereum logs an extreme wick on each side, reflecting an intraday bias conflict. Source: ETHUSD on TradingView.com
Ethereum logs an extreme wick on each side, reflecting an intraday bias conflict. Source: ETHUSD on TradingView.com

But the price managed to stay in positive territory ahead of the US session. Ethereum’s correction to below $900 followed a sharp upside retracement towards $1,000, reflecting moderate buying sentiment near the lower levels.

Ethereum Technical Setup

The $1,000-level later assumed the role of a pivot. That said, if ETH/USD stays above the price floor, then it shows an intraday bullish bias, but if the pair plunges below it, then it reflects a bearish bias on the same short-term timeframe.

Ethereum, ETHUSD, ETHBTC, ETHUSDT, cryptocurrency
Ethereum eyes further upside as long as it holds the red support area, per Rekt Capital. Source: ETHUSD on TradingView.com
Ethereum eyes further upside as long as it holds the red support area, per Rekt Capital. Source: ETHUSD on TradingView.com

Technically, Ethereum could pull back to its 20-day moving average (the green wave near $730) and still retain its bullish bias. That is due to the cryptocurrency’s performance during the year-end holiday trade—from $551 on December 23 to as high as $1,168.99 on January 4—which gives it ample room to locate a short-term bottom and re-attract buyers.

“The old resistance is a new support,” stated a pseudonymous analyst on Monday, pointing to the area between $750 and $915. He noted that the range could become an ideal “dip-buying territory.”

Why Buy?

The core question remains that what prompts traders to purchase Ethereum in the first place. The answer lies in the classic supply-demand economic model.

CryptoQuant CEO Ki-Young Ju noted that people are actively withdrawing their ETH holdings from crypto exchanges all across the board. That means that a majority of them have other interests than trading their Ethereum for other assets.

They might include staking, which involves providing crypto tokens to ensure liquidity on decentralized finance protocols in return for yields. Meanwhile, traders may also be holding ETH for the long-term, thereby decreasing its active supply against an increasing demand.

“It seems the sell-side liquidity crunch started to hit ETH just like the BTC market,” said Mr. Ju. “For BTC, all exchanges’ reserves decreased by 31% compared to Feb 2020. For ETH, all exchanges’ reserves decreased by 20% compared to May 2020.”

Meanwhile, a higher funding rate in the short-term offsets Ethereum’s long-term bullish outlook. Data provided by Glassnode shows that the Ethereum futures’ funding rate is around 0.2 percent across all the derivatives exchanges. The average threshold is 0.01 percent.

That increases the possibilities of more long liquidations, given the derivatives market remains overwhelmingly bullish despite near-term corrections risks in the spot one.

Over $1.17B of Bitcoin Longs Liquidated as Price Slumps Below $30K; What’s Next?

Bitcoin derivatives traders who opened bullish positions as the cryptocurrency reached its record high, near $34,500, are now staring at massive losses.

Data provided by ByBt.com shows that the BTC/USD market liquidated long contracts worth $1.17 billion as of 2130 EST Sunday. The stop-losses triggered as the Bitcoin price slumped back below $30,000 amid a corrective spot market move, leaving derivative traders with open short positions in a profitable state.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin Market Liquidation chart. Source: ByBt.com
Bitcoin Market Liquidation chart. Source: ByBt.com

Figures indicate that long position holders on Binance alone lost $339.37 million, followed by Huobi, whose traders suffered $258.1 million worth of losses. That eventually marked the Bitcoin market’s worst one-day liquidation after November 25 last year. On that day, long traders had lost about $999.52 million.

Bullish Anyway

None of the recent major long liquidations materialized into a broader bearish trend.

Spot traders remained long-term bullish on Bitcoin owing to its increasing prominence as a hedging asset among mainstream financial institutions and corporations. The one after November 25, for instance, saw the BTC/USD exchange rate climbing by as much as 114 percent to settle a record high of $34,810.

Many analysts admitted that institutional investors have lately utilized retail-led price dips to purchase Bitcoin en masse. As a result, the flagship cryptocurrency has rallied exponentially after developing concrete supports near $16,200, $17,650, $22,000, and the most recent $27,500.

For instance, a pseudonymous chartist said Monday that Bitcoin’s ongoing dip would wash out what he believes are “retail degens,” i.e., the cryptocurrency will move from weak to strong hands—those who would prefer to hold their investments long-term.

The so-called “HODLING” sentiment, in turn, comes from a supportive macroeconomic outlook.

People treat Bitcoin as a safe-haven against falling bond yields and the US dollar. That serves as the same reason why billionaire investors like Paul Tudor Jones and Stan Druckenmiller have integrated the cryptocurrency into their portfolios. That further explains why MicroStategy, Square, Ruffer Investments, MassMutual, and others, have opted to invest in Bitcoin.

Bitcoin Technical Setup

Bitcoin investors have also treated the 20-day exponential moving average wave (the green curve in the chart below) as their medium-term support. Each of the cryptocurrency’s downside price correction stops at or ahead of the said floor before resuming its move upward.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin pulls back after testing $27,678 as support. Source: BTCUSD on TradingView.com
Bitcoin pulls back after testing $27,678 as support. Source: BTCUSD on TradingView.com

Right now, the 20-EMA wave sits just above $26,500. The Bitcoin price could extend its downside correction to the said level to attempt a pullback move back above $30,000. Meanwhile, a slip below the 20-EMA exposes a further bearish move towards the 50-day simple moving average (blue), lurking just below near $21,500.

Tether (USDT) To Face Do or Die Situation in 2021: Messari Report

Tether is the cryptocurrency industry’s biggest threat in 2021, says a report penned by Messari’s Founder Ryan Selkins.

The 134-page thesis ventured into the stablecoin’s emergence as a proxy for the US dollar that helps crypto traders getting in and out of their positions quickly on exchanges. It also focused on the controversy that tails Tether following the New York State Attorney’s class-action lawsuit against its founders and a sister cryptocurrency exchange BitFinex.

Boom Against Gloom

Lawyers Vel Freedman and Kyle Roche alleged in their October 2019 filing that Tether defrauded its investors, manipulated the cryptocurrency markets, and concealed illicit proceeds. They added that Tether printed billions of dollars’ worth of USDT stablecoin to artificially inflate the price of Bitcoin, Ethereum, and other cryptocurrencies.

But the market largely ignored the warnings. Tether’s market capitalization soared from $4 billion in October 2019 to $20.9 billion in December 2020. Mr. Selkins noted that the exchanges largely boosted Tether’s popularity in the absence of any other voluminous alternative. However, the situation could change in 2020.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT, Tether, USDT
Tether market cap. Source: USDT on TradingView.com
Tether market cap. Source: USDT on TradingView.com

The research analyst discussed the worst-case scenario for Tether and BitFinex, citing the “dual lawsuits” against BitMEX filed by the Commodity Futures Trading Commission and Departmnent of Justince. He stated that an active investigation against the crypto derivative exchange caused its users to migrate towards alternative platforms.

Fearing the same could happen to Tether, Mr. Selkins presented a polar opposite Tether outlook for 2021 — a do or die situation as its market cap continues to grow amid an ongoing cryptocurrency market rally led by Bitcoin.

“Tether will either have an existential crisis or double its supply again in 2021,” he wrote. “There doesn’t seem to be a middle ground.”

SEC Investigation Rumor

Following the Securities and Exchange’s lawsuit against Ripple and its grossly negative impact on the firm’s native token, XRP, many agree that the Tether’s USDT could suffer a similar fate. But for that, the US Treasury needs to categorize stablecoins as securities.

And that is looking to come true. A Twitter user @RealWillyBot shared details about a DoJ order that ruled stablecoins as securities. He shared a screenshot that read:

“Depending on its design and other factors, the stablecoin may constitute a security, commodity, or a derivative subject to the US federal securities, commodity, or/and derivatives laws.”

If the proposal becomes a law, then USDT will become a security token. That could shock the cryptocurrency markets on the whole due to its overly addiction to the stablecoin that coughs out an average of $77 billion worth of transactional volume every day.

Fears of Bearish Correction Loom as Bitcoin OTC Deals Plunge

Bitcoin faces the prospects of undergoing a massive downside correction as on-chain data shows a plunge in its over-the-counter deals.

According to data fetched by CryptoQuant, the total amount of Bitcoin tokens flowing out of Coinbase Pro’s addresses to their newly-created custodial cold wallets has decreased ever since BTC/USD crossed above $23,000.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Coinbase Pro Bitcoin Outflow chart. Source: CryptoQuant

As CryptoQuant’s CEO Ki-Young Ju noted earlier, these wallets hold Bitcoin for major crypto-enabled firms like Genesis Trading (which buys Bitcoin for Grayscale Investments, one of the largest crypto accumulators) and Ruffer Investment (which bought around $750 million worth of BTC last year).

That allows the data analytics portal to equate large BTC transfers from Coinbase Pro to new wallets as OTC transactions.

Retail Involvement High

The statements appeared as Bitcoin logged another all-time high on Thursday, hitting $29,321 ahead of New Year’s eve. Its latest rally came on the backs of a devaluing US dollar and prospects of new institutional investments into the cryptocurrency space, especially after Skybridge Capital’s big reveal that it holds Bitcoin worth $182 million.

The news also coincided with a recovery in stablecoin inflows into all cryptocurrency exchanges from their December 13 low. A CryptoQuant metric earlier this week showed that the total number of stablecoin counts increased from 20,000 (BTC price: $19,270) to 30,590 ($27,000).

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin rally pauses after hitting $29,000. Source: BTCUSD on TradingView.com

That showed that the rally to $29,000 was majorly retail-driven, which further increased Bitcoin’s potential to correct lower in the coming sessions. Small and medium-capital traders tend to sell the cryptocurrency at its local top while investors with a long-term outlook use those dips to purchase it.

With OTC deals going down, it might be possible that institutions are waiting for the next Bitcoin correction to accumulate more of its units.

“We haven’t had significant Coinbase outflows since $23k, tokens transferred is decreasing, and the fund flow ratio for all exchanges is increasing,” explained Mr. Ju. “Still possible that institutional investors would join anytime soon, but we might face a correction if it continues like this.”

The 2021 Bitcoin Forecast

Many analysts agree that Bitcoin’s rally has become overheated enough to undergo a price correction. Nevertheless, that has not changed their perspective about a bullish 2021 ahead as long as the Federal Reserve stays on its indefinite monetary stimulus plans to aid the US economy through the coronavirus pandemic.

David Grider, the lead digital strategist at Fundstrat, said in a note that he expects the Bitcoin price to touch $40,000 within the next 12 months. He further noted that the cryptocurrency might face many bumps on its way upward, led by potential regulatory actions or mere profit-taking.

“We wouldn’t view these events as long-term negatives for Bitcoin, but if such events unfold, they may negatively impact broader market sentiment and prices,” Grider explained.

Bitcoin Eyes $30K as UK Vaccine Approval Boosts Risk Appetite

Bitcoin secured yet another record high level on Wednesday, helped by news of Anthony Scaramucci’s SkyBridge Capital investment’s investment into the cryptocurrency space.

The benchmark cryptocurrency topped at $28,580 during the Asian morning session after reports revealed that the investment management firm had purchased $182 million worth of Bitcoin. The news soon followed a dramatic stablecoin inflow into the cryptocurrency exchanges, pointing to traders’ willingness to “buy-the-news.”

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin price vs. Exchanges' stablecoin inflow. Source: CryptoQuant

Vaccine, Profit-Taking

Nevertheless, the BTC/USD exchange rate sharply reversed its course owing to profit-taking sentiment among daytraders. The pair remained in the negative area throughout the European session, falling to as low as $27,311 in the early trade.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin finds support at the 20-period MA curve near $27,000. Source: BTCUSD on TradingView.com

Part of the reason could be Britain’s fresh approval of the COVID-19 vaccine developed by AstraZeneca and Oxford University.

Hani Redha, a multi-asset portfolio manager at PineBridge Investments, called it an “important development” in the global fight against the pandemic. Unlike its peers, the AstraZeneca-Oxford vaccine will have more doses to transfer across the developing countries against comparatively higher temperatures.

“Just the sheer number of doses there will be and the fact that distribution of it is easier, particularly in developing countries, makes it important,” he noted.

Investors grabbed the vaccine news as their cue to increase their short-term exposure in the risky markets. The pan-European Stoxx 600 index climbed 0.11 percent, while the FTSE 100 index on the London stock exchange posted a modest 0.1 percent gain.

Bitcoin, on the other hand, appeared sidelined.

A Bitcoin Run-Up to $30,000

Meanwhile, a weaker dollar limited Bitcoin’s post-high losses amid a thin trading session.

The US Dollar Index, which measures the greenback’s strength against a set of foreign currencies, fell to its lowest levels since April 2018. So, while on the one hand, the vaccine news troubled Bitcoin traders, on the other, a weakening dollar safeguarded their medium-term bullish bias for the cryptocurrency.

Investors view Bitcoin as a hedge against inflation and current debasement. Meanwhile, The US dollar is a global reserve asset that has fallen by more than 12 percent from its mid-March highs. Its plunge has followed a massive stockpiling of debts by the Federal Reserve and the US government’s two stimulus packages of a combined worth of more than $3 trillion.

Entering the US session, the anti-fiat sentiment could prompt further upsides for Bitcoin’s ongoing bullish move. A pseudonymous analyst believes the cryptocurrency could close towards $30,000 based on a reliable technical indicator.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin is brewing for another upside push, as highlighted by IncomeSharks. Source: BTCUSD on TradingView.com

“Bitcoin’s SuperTrend,” the analyst noted, “on the daily gave a buy at $11,000. It is yet to flip bearish. Almost a 155% move just following this indicator. Every support touch has been a great buy opportunity (loaded up at $16,000 most recently).”

Compound (COMP) Outruns Top DeFi Tokens as TVL Closes Above $2B

Compound Finance’s native token COMP was among the biggest gainers in the decentralized finance space on Wednesday.

The fourth-largest DeFi token by market cap surged by more than 10 percent, hitting an intraday high of $154.08 as traders assessed a flurry of upside fundamentals around it. A pseudonymous analyst noted that the Compound protocol lured traders with competitive annual percentage yields on its staking platform. That allowed its liquidity pool to attract about $820 million worth of tokens in just five hours.

“Wonder if longing the bluechip with the highest APY when staked in a pool of a protocol that has amassed ~820m TVL in 5hrs is a reasonable strategy,” the analyst tweeted, followed by the word “COMP.”

The total value locked inside the Compound smart contracts surpassed $2 billion following the capital inflow. It corrected lower on Wednesday, but traders largely ignored the downside move.

DeFi, decentralized finance, Bitcoin, Compound, Ethereum
Compound Total Value Locked sustains above $2 billion. Source: DeFi Pulse
Compound Total Value Locked sustains above $2 billion. Source: DeFi Pulse

That may have to do with the Compound’s whitepaper released last week wherein it shared the details of its new blockchain: the Compound Chain. The paper projected it as a protocol-independent ledger that would store and transfer crypto assets between multiple blockchains.

A Break from Ethereum

Compound currently uses Ethereum as its principal blockchain. Therefore, its lending protocol cannot offer support to non-Ethereum assets. Compound Chain strives to fill the shortcomings, thereby enabling its protocol to facilitate direct liquidity across “peer chains.” They include ETH 2.0, Polkadot, Solana, Quorum, Celo, and many others.

The Compound Chain will also introduce a native stablecoin CASH to pay block validators. COMP will continue to serve as a governance token, providing its holders the right to propose and vote for changes in the core Compound protocol.

The feature expects to come out in the first quarter of 2021.

COMP At Risk, Nevertheless

The latest COMP price rally, meanwhile, came with its own set of bearish foretellings. Technically, its December uptrend drew what analysts call an “Ascending Broadening Wedge.”

The pattern forms when an asset trends inside an area between two diverging trendlines, with the upper one acting as resistance and the lower one as support. COMP is fluctuating inside a similar structure since early November, as shown in the chart below.

DeFi, decentralized finance, Bitcoin, Compound, Ethereum, COMPUSD, COMPBTC
The Compound token is eyeing a bearish reversal. Source: COMPUSD on TradingView.com
The Compound token is eyeing a bearish reversal. Source: COMPUSD on TradingView.com

Ascending Broadening Wedges ends up turning assets lower 79 out of every 100 times, according to a study by Central Charts. Meanwhile, there is a 40 percent chance that the price may head towards the upper trendline for a pullback. That roughly puts COMP en route to a $200-valuation.

A breakdown below the Wedge could bring the price to as low as $81.

Binance Fractal That Last Sent BNB Up By 290% Flashes Again

Binance’s native token BNB was among the few gainers on Tuesday as the rest of the high-cap cryptocurrency assets corrected lower.

binance coin, binance, bnb, cryptocurrency
Binance Coin trades inside a medium-term ascending parallel channel. Source: BNBUSD on TradingView.com
Binance Coin trades inside a medium-term ascending parallel channel. Source: BNBUSD on TradingView.com

The BNB/USD exchange rate climbed up to 13.47 percent to $40.69, a level only a few basis points below the pair’s all-time high of $43.15 from June 2019. So it seems, traders flocked into the Binance market to seek safety from XRP, a Ripple-backed token that lost more than 32 percent of its value in the last 24 hours.

It is not clear why traders opted for BNB even when other bullish tokens like Bitcoin and Ethereum were available as hedging alternatives. But from the look of it, the capital inflow into the Binance market picked momentum after the exchange’s CEO Changpeng Zhao announced that they would launch new projects in 2021.

Bottoming Out

The probability of BNB hitting an all-time high in the dollar-pegged market increased as the token hinted that it is bottoming out against Bitcoin.

binance coin, binance, bnb, cryptocurrency
Binance Coin tests a classic support area for a potential long-term rebound. Source: BNBBTC on TradingView.com
Binance Coin tests a classic support area for a potential long-term rebound. Source: BNBBTC on TradingView.com

The BNB/BTC exchange rate reached a classic support area, as shown in the chart above. The pair this week rebounded off the rectangular price floor, repeating the beginning of a fractal that last sent its prices soaring by almost 290 percent.

That is partially due to Bitcoin’s overbought status. The flagship cryptocurrency’s latest rally pushed its prices up from late $10,000 to as high as $24,300 this month. Meanwhile, it also raised the possibility of massive sell-offs at the hands of whales. Such a scenario often leads traders to look for hedging assets inside the crypto space, benefiting coins like BNB.

BNB/BTC weekly RSI is at 32, which places the pair in an ideal accumulation zone. Therefore, traders could increase long exposure on BNB against BTC, with Fibonacci levels in the chart above serving as potential upside targets.

BNB/USD

Meanwhile, Mr. Zhao noted that BNB could achieve similar results in the dollar-pegged markets.

“BNB’s ATH in the Dec 2017/Jan 2018 run was $24 (when BTC made $19700),” he said. “BNB had since broken that ATH in July 2019 ($39), before BTC made a comeback. It now looks like it’s going for it again.”

The weekly RSI on BNB/USD charts was above 70, reflecting its overbought status in the medium-term. That amounted to a downside correction.

Calls for Another Bitcoin Bull Run Grows as Its Open Interest Soars

Bitcoin prices eased on Tuesday as traders with short-term risk appetite locked their profits.

The benchmark cryptocurrency slipped by up to 4.56 percent to an intraday low of $25,833. Nevertheless, attempts to extend the bearish momentum faltered due to a comparatively stronger buying pressure near the $25,000-area. Since Christmas, the level held as concrete support for the third time raised expectations that it would serve as a floor for the next upside run.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin consolidates inside a Descending Channel pattern. Source: BTCUSD on TradingView.com
Bitcoin consolidates inside a Descending Channel pattern. Source: BTCUSD on TradingView.com

Many analysts agreed that the BTC/USD exchange rate now eyes a run-up towards $30,000. A pseudonymous daytrader noted that the pair is trending inside a Descending Triangle, adding that the current technical setup could see it breakout to the upside and at least hit $29,000.

Meanwhile, he also noted that a bearish reversal scenario would crash the price towards $23,200.

Bitcoin Open Interest

The statements appeared as Bitcoin Futures listed on the Chicago Mercantile Exchange reported a record number of outstanding derivative contracts, also known as Open Interest (OI).

Data fetched by Skew showed that OI on the CME Bitcoin Futures reached $2.6 billion, accompanied by the record-setting daily volume of $1.7 billion. That pointed to a strengthening momentum ahead, especially among institutional traders that rely on regulated exchanges like CME to gain exposure in the Bitcoin market.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
CME Bitcoin Futures OI and Volume report. Source: Skew
CME Bitcoin Futures OI and Volume report. Source: Skew

Meanwhile, data analytics platform DataMish noted that the total number of outstanding derivative contracts were majority long. The long/short interest on Bitcoin futures and options was 87.37 percent long against 12.63 percent short, reflecting that most investors have a bullish bias for the cryptocurrency.

DataMish also showed a decline in the net hedged and unhedged short Bitcoin positions, suggesting that even bears expect the Bitcoin price rally to continue higher without facing major resistance levels.

Institutional Investment Rocketing

The lack of a strong bearish bias comes in the wake of growing institutional capital inflow into the Bitcoin market. Data fetched from ByBt.com shows that Grayscale Investments is holding more than 607,000 BTC worth $16 billion.

Meanwhile, other mainstream corporations are raking up their Bitcoin reserves to protect themselves against fiat inflation caused by a depreciating US dollar. Just recently, Nasdaq-listed Greenpro Capital announced it would raise debts worth $100 million to buy Bitcoin, calling the cryptocurrency “a reliable future store of value.”

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Grayscale Investments Bitcoin reserves. Source: Bybt.com
Grayscale Investments Bitcoin reserves. Source: Bybt.com

“The growth in capital flowing into BTC is now equivalent to Apr 2017 of the last cycle,” said Willy Woo, an on-chain analyst. “The early bull phase is over, the main phase has started; it’s come early.”

Bitcoin was trading at $26,591 at the time of this writing.

US Dollar Projected to Hit Cyclical Bottom in 2025—What Does It Mean for Bitcoin?

It is safe to assume that Bitcoin’s parabolic rally in 2020 has everything to do with the underperformance of its arch-nemesis, the US dollar.

The charts tell the entire story. In March 2020, a 60 percent crash in the Bitcoin market coincided with an 8.80 percent jump in the US dollar index, a barometer to measure the greenback’s strength against a set of foreign currencies.

But later, Bitcoin regained its bullish momentum as its price notched higher by more than 600 percent. Meanwhile, the US dollar fell by up to 12.87 percent from its mid-March high.

us dollar, us dollar index, dxy, bitcoin
US dollar is at the beginning of a cyclical bear market. Source: DXY on TradingView.com
US dollar is at the beginning of a cyclical bear market. Source: DXY on TradingView.com

The prolonged US dollar bearish momentum began after the Federal Reserve launched an open-ended bond-buying program and slashed its benchmark lending rates to almost zero. Later, the US government launched a $2.3 trillion stimulus program to help millions of Americans through the COVID-19 pandemic-led economic slowdown.

For investors, the scenario was crisp and clear. An abundant supply of the US dollar into the economy removed its purchasing power altogether. Fearing that their cash-based portfolio would suffer, they started increasing their exposure to riskier assets. Bitcoin, which comes with a limited supply cap of 21 million and a predefined supply rate, benefited from the said fundamentals.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin is trading near its record high. Source: BTCUSD on TradingView.com
Bitcoin is trading near its record high. Source: BTCUSD on TradingView.com

Entering 2021, the US economy is still facing the same set of fundamentals. The country’s coronavirus infection rates have soared higher and have prompted governments to impose fresh lockdowns. Meanwhile, the jobless rate continues to stay higher. As a result, the White House has passed another stimulus package, this time of a dwarfed $900 billion.

Bitcoin, around the same time, has reached a new record high above $28,300.

The Cyclical Scenario

Analyst at crypto-focused investment advisory firm TradingShot noted that the US dollar would continue its decline until 2025.

His bearish analogy borrowed cues from the greenback’s cyclical trends. Since the early 1970s, the US dollar index has witnessed three repetitive trends. Each cycle lasts for almost 5,700 days and prints about 190 monthly candles. Meanwhile, almost all of them have roughly the same cyclical bottom at near 78.

US Dollar, US Dollar Index, DXY
US Dollar index cycles. Source: DXY on TradingView.com
US Dollar index cycles. Source: DXY on TradingView.com

“As a result, while the next top for the DXY (which I have to add at this point that the sequence is Lower Highs) maybe around 2032/33, the next Bottom (based on the waves) should be around 2025,” the TradingShot analyst explained.

“That means that we are still a long way from seeing the cyclical bottom and the best course of action is to sell every rally,” he added.

Bitcoin Rally Until 2025?

Ronnie Moas, the founder of Standpoint Research — an investment management firm, noted that Bitcoin is on its way to hit $100,000 by 2022 should more institutions started using it as a hedge against their fears of dollar devaluation.

The macro analyst, who correctly predicted a $28,000 Bitcoin price target in late October, stated that the cryptocurrency would mousetrap a good portion of gold’s market capitalization in the future. Investors also treat the precious metal as a hedge against inflation, which makes it a direct rival to Bitcoin.

All and all, a 20 points drop in the US dollar index would push more firms and investors towards gold and bitcoin as safe-haven alternatives. By 2025, the cryptocurrency should be trading above $100,000, as per Mr. Moas’s prediction.

Ethereum Price Hits 37-Month High on Strained Supply Rate

Ethereum prices rose Monday as its on-chain fundamentals confirmed supply constraints across all the leading exchanges against rising demand.

The Ethereum-to-dollar exchange rate climbed by up to 8.72 percent to $740, a level it last tested in May 2018. Intraday-wise, the pair’s upside move came in the wake of a correcting Bitcoin, which, on Sunday, rose to a new record peak of $28,377.

Ethereum, ETHUSD, ETHBTC, ETHUSDT, cryptocurrency
Ethereum is consolidating higher in a Wedge-like pattern. Source: ETHUSD on TradingView.com
Ethereum is consolidating higher in a Wedge-like pattern. Source: ETHUSD on TradingView.com

So it appears, traders preferred to sell the Bitcoin’s top to seek opportunities in a lowly-trading Ethereum, whose idiosyncratic fundamentals, including its blockchain protocol’s much-publicized upgrade to proof-of-stake, also pointed to a long-term bullish outlook. Some analysts agreed that the Ethereum price could close above $1,000 next year.

Ryan Watkins, the senior research analyst at Messari — a crypto-focused data platform, stated that institutions might start buying Ethereum in 2021 as they explore profitable crypto alternatives beyond Bitcoin.

“It’s a much easier jump from BTC to ETH from there,” he added.

Ethereum Supply Declines

The primary fundamental behind Ethereum’s wild upside moves is the classic supply-demand model. Switching to proof-of-stake means more people would lock their ETH holdings into the Ethereum 2.0 smart contracts to earn attractive annual percentage yields, thereby removing a good supply from the market. And so it seems, that is already happening after the early December protocol upgrade.

According to data analytics platform Santiment, the Ethereum balance on all the crypto exchanges has fallen to a 1.5 year low. It typically means fewer traders are looking to exchange their ETH holdings for other assets in the short-term.

Ethereum, ETHUSD, ETHBTC, ETHUSDT, cryptocurrency
Ethereum supply metrics. Source: Santiment
Ethereum supply metrics. Source: Santiment

Meanwhile, Ethereum miners’ balances have also crashed to levels last seen two years ago. It indicates a growing demand for the cryptocurrency in over-the-counter and retail markets.

“Both are great validators,” commented Santiment.

Technical Setup

The biggest bullish catalyst for Ethereum is not coming from the US dollar, but the bitcoin-pegged trades.

The ETH/BTC traders have expressed their conviction for a medium-term bullish bias as the pair looks to have bottomed out on its longer timeframe charts. Traditionally, it signals the beginning of a so-called “altcoin season,” wherein traders exit their Bitcoin positions to seek profitability in alternative cryptocurrencies.

Ethereum, ETHUSD, ETHBTC, ETHUSDT, cryptocurrency
The weekly close of Ethereum on the BTC pair signifies a bottom, as Michaël van de Poppe presented. Source: ETHBTC on TradingView.com
The weekly close of Ethereum on the BTC pair is signaling a bottom, as presented by Michaël van de Poppe. Source: ETHBTC on TradingView.com

“Closed above the crucial threshold of this range, indicating further upwards momentum [will] occur, and another HL is created,” noted Michaël van de Poppe, an independent market analyst, adding that it is a “good sign” for Ethereum.

Meanwhile, analyst Edward Morra spotted an inverse head and shoulder pattern on the ETH/BTC weekly chart. He noted that the technically bullish pattern could send the pair up by as much as 150 percent.

Ethereum, ETHUSD, ETHBTC, ETHUSDT, cryptocurrency
Ethereum inverse head and shoulder pattern, as presented by Edward Morra. Source: ETHBTC on TradingView.com
Ethereum inverse head and shoulder pattern, as presented by Edward Morra. Source: ETHBTC on TradingView.com

Mr. Morra’s long-term price target for ETH/BTC is 0.05.

No Reason to Short Bitcoin, On-Chain Analyst Explains Why

Those who plan to short the ongoing bull run must think twice, as per on-chain analyst Kim-Young Ju.

The chief executive of CryptoQuant, a data analytics firm, said in a Thursday tweet that traders have no reason to place bets on Bitcoin’s potential fall. He explained that despite the cryptocurrency’s short-term downside correction from its record high of $24,300, institutional investors buy it at local lows.

Mr. Ju highlighted that with a so-called “Coinbase Pro Outflow” indicator. The metric measures the amount of Bitcoin getting transferred from the US exchange’s wallets. He noted two instances wherein the Outflow rate surged. At that time, the cost to purchase one Bitcoin was well above $23,000. Mr. Ju said:

“The most important factor now is institutional investors. Massive [over-the-counter] deals still on-going according to on-chain metrics, and Coinbase outflow hit 24k BTC yesterday.”

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin’s Outflow from Coinbase Pro trading platform. Source: CryptoQuant
Bitcoin's Outflow from Coinbase Pro trading platform. Source: CryptoQuant

In simple terms, the arrival of institutional capital into the Bitcoin market primarily as the cryptocurrency trades above $23,000 increases the level’s potential to act as strong support. Mr. Ju noted that traders would face risks of extreme losses if they attempt to trade against the institutional bets, i.e., if they will increase their short positions below $23,000 against a majority long outlook.

Predictively Bullish

The analyst was among the firsts to spot Coinbase Pro Outflow into some cold wallets on December 18, just six days before Bitcoin hit a record high. He assumed that the trading platform is conducting OTC deals, adding that the recipient wallets are—in fact—custodial wallets.

“As I said, it went to custody-looked-like wallets. It seems that Coinbase makes a new cold wallet for each customer after the OTC deal for institutions.”

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Coinbase Pro is sending a massive amount of BTC to individual wallets. Source: Kim-Young Ju
Coinbase Pro is sending a massive amount of BTC to individual wallets. Source: Kim-Young Ju

As the Coinbase Pro Outflow keeps getting higher, it signals another upside run in the Bitcoin market.

“I’m very bullish on BTC,” asserted Mr. Ju.

Bitcoin Warning

Meanwhile, Alex Mashinsky, the founder of Celsius Network, has an opposite outlook of the Bitcoin market. The analyst noted that traders should not open new long positions or buy BTC based on a short-term supply-demand movement.

“Be careful,” warned Mr. Mashinsky. “80% of the recent $8 billion in new Grayscale contributions are in-kind and much of it at 2-4X leverage. When funds finish selling we will be back at the $16k levels. About $4B in GBTC sales is going to happen in the next 3 months.”

Synthetix (SNX) Hits Record High amid DeFi Correction; Here’s Why?

Synthetix’s native token SNX emerged victorious on the day its rival decentralized finance tokens turned lower.

The SNX-to-dollar exchange rate hit a fresh record high of $8.68 on Wednesday as a flurry of uplifting fundamentals prompted traders to increase their bids on the pair. That included the introduction of a new staking platform.

A Bullish Expansion

Sythentix’s proprietary dapp went live on Tuesday, paving the way for people to stake their SNX holdings to earn attractive yields. Traders typically increase their short-term bullish bias on DeFi projects that attempt to expand their service portfolio. Earlier, YFI, the governance token of decentralized aggregator platform Yearn.Finance also surged twofold after the protocol ventured into lending and decentralized exchange services.

The SNX/USD exchange rate, meanwhile, received further boost from Coinbase Pro. The US-based crypto exchange listed the token on its trading platform last week after months of speculation. Overall, the cost to purchase one SNX token surged almost twofold in the last eleven days amid the overall cryptocurrency market euphoria.

Synthetix, SNX, cryptocurrency, DeFi
Synthetix continues its uptrend despite downside correction across the DeFi space. Source: SNXUSD on TradingView.com
Synthetix continues its uptrend despite downside correction across the DeFi space. Source: SNXUSD on TradingView.com

In comparison, other DeFi tokens underperformed. SNX surged by about 19 percent in the previous 24 hours while YFI, UNI, and AAVE fell within the range of 3-7 percent.

“Potentially related to SNX, SNX volumes have shot through the roof over recent days, with Binance, OKEx, and even decentralized exchanges like SushiSwap seeing large increases in volumes for the coin,” noted Nick Chong in the newsletter Alpha Alarm, also co-authored by analysts Joseph Young and Cole Peterson.

“SNX is often seen as a DeFi coin that is “slept on,” and may thus be rallying as the market corrects itself,” he added.

What’s Next for SNX?

The SNX/USD exchange rate is fueling higher on short-term bullish fundamentals. But a recovery across other DeFi assets could prompt speculators to dump their profitable SNX positions to seek opportunities in low-priced tokens.

The narrative fits the technical description of the Sythentix token’s four-hour chart. SNX/USD is forming an ascending broadening wedge after a recent bullish movement. Technically, that should reverse the uptrend if the price breaks below the structure’s support in the coming sessions. In 80 percent of cases, the exit is bearish.

Synthetix, SNX, cryptocurrency, DeFi
Synthetix trade setup as per its ascending broadening wedge setup. Source: SNXUSD on TradingView.com
Synthetix trade setup as per its ascending broadening wedge setup. Source: SNXUSD on TradingView.com

The downside target after the wedge breakout is near $4.12.

Key Levels to Watch as Ripple’s XRP Crashes amid SEC Lawsuit FUD

In a reversal of fortunes, Ripple’s XRP crashed drastically as investors reacted to a lawsuit from the Securities and Exchange Commission (SEC) alleging the token is illegal security.

The US securities regulator charged San Francisco-based Ripple Labs and its two executives for allegedly selling $1.3 billion worth of XRP in an unregistered public sale.

“We allege that Ripple, [Chris] Larsen, and [Brad] Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system,” Stephanie Avakian, the director of the SEC’s enforcement division, said in a statement.

Nevertheless, Ripple CEO Brad Garlinghouse rubbished the SEC lawsuit by calling it “fundamentally wrong as a matter of law and fact.” He vowed to challenge the regulator in court. Unfortunately, his assurance did little in helping XRP out of its running freefall.

Bearish Woes

The cost to purchase one XRP token sunk by as much as 37.94 percent in response to the SEC’s charge. It happened as the total XRP long liquidations in the last 24 hours surpassed the $36.5 million mark.

Meanwhile, XRP’s potential to register extended losses increased further after OSL, a Hong Kong-based trading platform, delisted its Ripple-oriented services. Some community members agreed that it could prompt other exchanges to delist XRP as well.

That raised the worries of a Long Squeeze — a situation in which investors who hold long positions feel the need to sell into a falling market to cut their losses.

XRP Technicals

XRP completely invalidated the Bull Flag indicator after its strong upside rally last week on a technical front. As shown in the chart below, the token broke below the consolidation pattern to flip crucial support at $0.33 into resistance.

Ripple, XRP, XRPUSD, XRPBTC, XRPUSDT, cryptocurrency
The Ripple token eyes further downside correction as the SEC FUD grows. Source: XRPUSD on TradingView.com
The Ripple token eyes further downside correction as the SEC FUD grows. Source: XRPUSD on TradingView.com

Traders now eye an extended correction towards levels with historical value. The first in line is $0.26 that served as resistance during the September-November consolidation period. Breaking below the flipped level would have the XRP price test $0.20 as its downside target.

 

Bitcoin Miners Turn Savers as Price Hits All-Time High; What It Means

Bitcoin miners used to be the biggest cryptocurrency dumpers when its price traded near all-time highs. Nevertheless, their sentiment has changed drastically in the latest price rally.

Data fetched from Glassnode, an on-chain market intelligence platform, shows that miners are not spending their Bitcoin than usual. It took cues from its proprietary indicator known as the Miner Outflow Multiple, which measures Bitcoin withdrawals from miners’ wallets on a seven-day average.

The readings on it showed miners spending BTC above the known historical average but not as much as they did during the previous highs.

“The Miner Outflow Multiple, which shows when BTC miner outflow is high with respect to its historical average, is far from previous tops and even below the 2019 local top,” commented Glassnode.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin Miners Outflow Fractals. Source: Glassnode

The Mining Psychology

Miners are at the forefront of Bitcoin production. They verify and add blocks to Bitcoin’s blockchain and, in return, receive bitcoin rewards. They prefer to sell those units in the open market to pay for their operational costs (mining equipment, electricity, etc.).

Meanwhile, miners also turn into investors by deciding to hold a portion of their Bitcoin rewards to speculate on their value. Their decision effectively reduces the cryptocurrency’s supply in the retail market. That plays an instrumental role in determining the BTC/USD price per the fluctuating demand.

A higher Bitcoin price gives miners plenty of reasons to sell-off their holdings. That happened in 2019 when BTC/USD reached a yearly high near $14,000. That also happened in 2017, when the pair closed towards $20,000.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT
Bitcoin price is trading near its all-time high of $24,300. Source: BTCUSD on TradingView.com
Bitcoin price is trading near its all-time high of $24,300. Source: BTCUSD on TradingView.com

But in 2020, miners are showing relatively lesser interest in dumping their positions even as BTC/USD has closed above $24,000 for the first time in history. So it seems, many of them want to hold onto their BTC investments. That paints a bullish picture for Bitcoin based on Supply Deficit.

When more miners decide to hold Bitcoin instead of selling them, it creates a supply deficit. That should automatically improve the cryptocurrency’s bullish bias against a booming demand among institutional investors.