Since yesterday, BTC/USD had a significant 4% climb and is now trading above $35,000. Yesterday, new buyers started to enter the cryptocurrency market and started to push the price up, but we noticed a more significant upswing today.
At the time of this writing, bitcoin was trading above $35,500, according to CoinGecko, and is finally showing signs of having found support above $35,000.
Our outlook on the market is quite sunny. The ongoing bullish price action keeps developing as we had foreseen, and today BTC/USD continued trading within the blue range, just like we predicted.
Today there hasn't been much news; however, CoinDesk's Zack Voell reports that MicroStrategy, a software company led by bitcoin bull, Michael Saylor, has made another significant purchase of $10 million. The author wrote:
"This marks the second $10 million purchase this year, after MicroStrategy bought 314 BTC less than two weeks ago."
As we have written countless times before, while institutional investors and wealthy individuals value bitcoin and keep pouring money into the market, there is little chance the price reverses its bullish trend.
Additionally, as long as volume continues to pick up the pace, and new buyers keep entering the cryptocurrency space, bitcoin's price should rise. For now, we expect bitcoin to continue its uptrend and move toward $40,000.
Unless some sellers suddenly enter the space, data shows there aren't many sell orders left to fill.
As a reminder, we are confident that BTC/USD will continue to move upward if:
- BTC/USD remains above its 20-day EMA (red), 50-day EMA (green) and 200-day EMA
(blue). - BTC/USD doesn't drop below $35,000.
- BTC/USD daily volume goes back above its 21-day Moving Average.
What Do Traders Think?
The first tweet of the day comes from Pomp (Anthony Pompliano), co-founder of Morgan Creek Digital and The Pomp Letter writer.
In his post, Pomp shares the stock-to-flow ratio (S2F) of bitcoin, created by PlanB.
At the time of the tweet, bitcoin's price was substantially correlated to the price predicted by the model. While the actual price was $34,900, the model's expected price was $30,200. The difference in the prices is less than 16%.
Pomp also wrote that
"The real retail revolution isn't happening in the stock market."
Can the issues retail traders face with the stock market get fixed by bitcoin? For instance, it is much harder to manipulate bitcoin's price than the price of a stock, since no additional bitcoin can be created outside the expected remaining quantity.
Additionally, because anyone can join the market at any time, it becomes harder for an individual entity, or a group of companies, to single-handedly manipulate the price at will during long periods.
To connect the chart to what Pomp wrote, bitcoin behaves like a Veblen Good, in the sense that the higher the price rises, the more buyers there are.
To conclude, we will look a bit deeper into how adoption affects the price with the help of our friend, Willy Woo.
The next post comes from Willy Woo, a crypto analyst whose Twitter profile describes him as an on-chain analyst. This tweet adds to the previous we discussed.
Woo shares a chart showing the logarithmic adoption curves of the internet (purple) versus bitcoin users (green) and PayPal accounts (grey). What Woo highlights is that
"Bitcoin has roughly the same users as the Internet had in 1997."
If you think about what this means, you'll understand how bullish this statistic is.
Consider the following: if the adoption curve of Bitcoin follows, more or less, the adoption of the internet, then we're still in 1997 in terms of the number of Bitcoin users versus internet users. In other words, there are plenty of opportunities to accumulate, as most of the players have not yet arrived at the market.
But this is not the only conclusion Woo takes as he notes:
"But Bitcoin's growing faster. Next 4 years on current path will bring Bitcoin users to 1b people, that's the equivalent of 2005 for the Internet."
We want to underline to all investors and traders the enormous upside that is still to come. If bitcoin's price is valued at around $35,000, and over 95% of the entire world population is unaware of it, what will happen to the price once these people join the market?
How much pressure will ten times the number of users put in the price of bitcoin? We will soon find out.
The next tweet comes from Holger, an analyst whose Twitter describes him as both a “permabull” and as the co-host of KONSENS & NONSENS Podcast.
This post builds on both the previous two tweets, as it shows the primary reason for the most recent price appreciation, and why we think BTC/USD will keep following the S2F indicator for the time being.
Holger shared a chart of the "BTC Balance on Exchanges," and what the data shows is rather spectacular. Since March 2020, when there was a massive crash in bitcoin's price, we see a constant rise in the price, alongside a continuous decline of the total bitcoin available at exchanges.
Bitcoin's price rose from a low of $5,030 on March 17, 2020, to around $35,000, where it currently sits, representing a jump of 595%. During the same time, the Total BTC Balance on Exchanges declined from over three million bitcoin to about 2,350,000, a 28% drop.
Therefore, for each 1% of the Total BTC Balance at Exchanges dropped, the price grew around 21%.
These are pretty exciting numbers, and what they confirm is that the less bitcoin is available, the more likely it is the price to rise.
The last post of the day comes from Secrets (@SecretsOfCrypto), a cryptocurrency investor, analyst and researcher with over 113,000 followers on Twitter.
Secret shares a recipe we think is the ultimate guideline to trading in the cryptocurrency markets in his post.
Of course, moving away from bitcoin means additional risk, but we also think it is an excellent opportunity to increase your bitcoin stack. Essentially, we believe there are two significant ways to increase of chances of winning (and losing):
- By using leverage (less risk) or,
- By moving from bitcoin to altcoins.
If the second option is more to your liking, we think the image shared by Secret explains pretty thoroughly how the money flows within crypto.
As Secret points out, the first money needs to flow into bitcoin, from real dollars or stablecoins.
Then, it moves typically into the second biggest coin, ether. From there, and once the gains of ether surpass the gains of bitcoin, that’s when the altcoin season truly begins.
Money naturally flows into large altcoin caps, from ether, usually coins with a total market capitalization over $100 million. Only after the run of large-cap coins finishes, the money starts flowing into low cap coins. It is at this stage that new fortunes are forged (and lost).
However, the cycle closes with investors and traders taking profits from altcoins back into ether and, ultimately, bitcoin. Hence, we think that holding bitcoin, even if one uses leverage, usually is less risky than moving into altcoins.
Not only that, but using leverage and stop losses is a magnificent strategy to make substantial gains.
Bitcoin Price Prediction
Today, bitcoin's price continued to move up and went above $35,000, according to CoinGecko.
Since yesterday, it has grown over 4%. The trend that began over the weekend seems to remain intact, providing a bullish outlook for the rest of the week.
This means the $40,000 price range is in play for the next couple of days.
Additionally, bitcoin remained within our predicted range. At the time of this writing, the digital currency was trading at $35,700.
Like we wrote in the introduction, there is little chance for a price reversal while institutional investors and wealthy individuals keep accumulating bitcoin. Just like we saw in the previous section, the total amount of bitcoin leaving exchanges keeps growing. Soon, there will be far fewer bitcoin left to trade.
Adding to the above, we also discussed what traders think about the most recent price action, and how most believe the price of bitcoin will keep following the S2F indicator, due to the sheer number of people joining the Bitcoin space.
To conclude our reasoning, please notice how BTC/USD keeps notching higher lows since the first crash that took price below the 20-day EMA. This signifies that the price has fully recovered from short sellers, and that bitcoin wants to move to higher price ranges.
How do we think the price will trade throughout the day? As shown in the above chart, we believe that bitcoin could find a top close to its prior record price, around $40,000, but we highly doubt BTC/USD reaches this level. It's quite likely new sellers enter the space around $39,000.
On the other hand, we don't expect the digital currency to drop much below $32,000, even if the trend suddenly reverses, due to the sheer number of buy orders placed between $30,000 and $33,000.
To finalize, the Volume Profile Visible Range (VPVR) shows a high number of buy orders between $31,000 and $37,000, and then again between $27,000 and $29,000, which means BTC/USD should not go below $30,000, even if things deteriorate significantly.
As a reminder, we think it's still possible that BTC/USD will attain a brand-new record price of around $50,000 before February comes to an end. For now, we remain bullish on both the shortand long-term price action.
Yesterday, bitcoin closed the day above $35,000; hence a sharp rise to $40,000 soon is not out of the question. Remember that while volume is low, there is a chance that volatility increases, which could trigger sudden moves to the upside or downside, so beware.