Yesterday, the price of bitcoin did not change much, after suffering a massive drop last week.
Since the previous trading day, BTC/JPY has lost north of 4%, but the price is still trading above all Exponential Moving Averages (EMAs), an extremely bullish sign.
Since the massive drop last Saturday, that pulled the price of bitcoin towards its 20-day Exponential Moving Average (EMA), bitcoin has recovered and been able to trade above this critical level, just below $30,000.
Regarding our prediction, yesterday, notice on the chart how BTC/JPY dropped to the exact bottom of the blue range? After touching $31,000 the price had a quick recovery and is back above this support level.
Today, the price of bitcoin has moved back below $35,000, according to CoinGecko, and was sitting at $32,300 at the time of this writing.
For the time being, we expect bitcoin to continue trading within the current consolidation range, between $30,000 and $35,000. The reason is due to the fact there are still many sellers before bitcoin breaks the critical $40,000 price range.
Do we think the price will return to its bullish trend, soon? Indeed we do. The reason continues to be linked to institutional investors entering the bitcoin market.
As Cointelegraph recently reported:
“Rothschild reported owning 30,454 shares of GBTC as of Dec. 31, 2020, according to Form 13F-HR, also known as the institutional manager holdings report. In its October filing, the firm reportedly owned 24,500 shares.”
This data shows that smart money continues to gobble up bitcoin, despite the short term bearishness.
To conclude our introduction, we think that soon a brand new wave of unsophisticated investors will enter the space that will push BTC/USD much above its previous high of $42,200. We’re unsure about the time frame, but we doubt bitcoin will fail to surpass $50,000 by the end of March.
For now, we think BTC/USD might have a few extra bounces between $30,000 and $35,000 before starting to rally toward $40,000. Once the price breaks its previous high, we should see a rapid move toward $50,000. Our analysis indicates the price of bitcoin will make a significant move closer to the month’s end or early February.
As a reminder, we are confident 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 $30,000
- BTC/USD daily volume goes back above its 21-day Moving Average.
What Do Traders Think?
The first tweet of the day comes from Joseph Young, whose Twitter profile describes him as an analyst and investor with more than 117,000 Twitter followers.
In his post, Young shares his short-term analysis explaining the current choppy price action. The analyst identifies three focal points:
“Options market weight towards sellers and puts.”, “Low Coinbase premium and outflow.” and “$BTC Miners selling.”
Young concluded that
“In short-term, I see the big range between $31k~$35k continuing.”
Just like we wrote in the introduction until a horde of new buyers comes into the bitcoin space, the likelihood the price moves back above $40,000 is rather slim.
Therefore, we agree with Young. Until there is a reversal of the consolidation trend, investors and traders should not expect significant moves from bitcoin.
However, what will happen to the price of bitcoin once buyers come in full force?
The next update builds on Young’s post and comes from George, a bitcoin investor and trader.
In his post, George shares a 1-hour chart of the price of bitcoin. He also adds a trendline (black) at $34,500, since that’s the level the trader believes there will be more volatility.
As George wrote:
“Reclaim that ($34,500) and I think we see 40k+.”
Historically, the range between $34,000 and $35,000 has been quite choppy and it represents an important resistance and support level for BTC/USD.
Hence, in case of bitcoin goes above $34,500, the odds are it will go beyond $40,000, since it should find strong support around $35,000.
Let’s hope George’s analysis is correct!
The third post of the day comes from Mati Greenspan, founder of the cryptocurrency research firm Quantum Economics, as well as a trader, investor, and licensed portfolio manager.
In his post, Greenspan shares a chart from DEFI PULSE that shows the Total Value Locked (USD) in DeFi, or Decentralized Finance. The data shows that since December the TVL has skyrocketed, doubling in value from $13 billion on December 1 to around $26 billion yesterday.
Is this good news for ether only, since most Dapps are built over ethereum? We don’t think so.
According to DEFI PULSE, the TVL in WBTC, a representation of bitcoin on ethereum, grew by 56% since early December to today. At the peak, the TVL in WBTC reached $4.5 billion.
Adding to the above, during the current month, the total bitcoin locked in WBTC grew from 107,000 BTC to 115,000. If that doesn’t sound like much, let’s broaden the range a little bit.
Year-to-Date, the TVL in WBTC grew by over 18,000%, going from 621 BTC on January 26, 2020, to around 115,000 BTC today.
However, it’s not only WBTC that has enjoyed significant gains. REN VM, another representation of bitcoin in ethereum, has seen a massive uplift in TVL as well. DEFI PULSE shows that the Total Locked Value in REN also grew massively, over 80%.
Therefore, it’s safe to assume the interest in DeFi by bitcoin holders is growing.
This essentially means that more bitcoin is being locked in ethereum, as time goes by.
There could be many reasons why investors choose to park their bitcoin in WBTC, but due to the recent growth in ether, our most educated guess is that they want to access the world of DeFi.
The last tweet of the day comes from Jameson Lopp, whose Twitter profile describes him as co-founder and CTO of Casa.
In his post, Lopp shares a hilarious meme containing an important critique of some analysts who rely too much on technical indicators.
The idea behind the meme is to show that both low IQ and high IQ people tend to focus on astonishing simple principles to enter and exit the bitcoin market, and do not rely on fancy technical analysis too much.
The reason is simple. Do you know how if you play with fire too much, you might get burned? The same logic applies. Essentially, if the message is that if you only rely on technical indicators and do not look into the broadened perspective of things, like Quantitative Easing pushing up the price of bitcoin, or inflation assisting with the ongoing rise in the price of global assets, you may be caught off-guard.
There is a famous saying among traders stolen from John Mayard Keynes that states “the markets can remain irrational longer than you can remain solvent.”
Hence, as we’ve written countless times before, do not attempt to perfectly time the market. We believe following the long-term trend is more important than trying to beat every short-term trend reversal. Indicators are quite useful but they will never tell you the whole story.
A powerful message behind the image shared by Lopp is that the focus of traders should not only be in winning, but also in not losing.
Bitcoin Price Prediction
Yesterday, the price of bitcoin had a minor recovery and even went above $33,000 for a short period, according to CoinGecko. Today, the price resumed its short-term bearish trend and is now trading below $35,000 at $32,200.
Adding to that, the price traded within the predicted range, moving between $30,000 and $38,000, just like we have foreseen.
Despite the current downtrend, most investors and traders remain quite bullish on the price of bitcoin for the end of Q1.
The reason why most are so positive on a speedy recovery of the price of bitcoin is that a significant number of institutional investors are entering the space. Hence, the more smart money buys bitcoin, the more buying pressure will be placed on the price.
Coming back to the topic at hand, how do we think the price will trade today? As shown in the above chart, we think that bitcoin could find a top close to $38,000, but we highly doubt BTC/USD comes close to reaching this target. There are still a high number of sellers around $35,000 meaning the price should remain below this range for the time being.
On the other hand, we don’t expect the digital currency to drop much below $30,000 due to the sheer number of buy orders placed between $27,000 and $29,000.
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 around $42,200 before February comes to an end. For now, we have scrapped all chances bitcoin will go above its record price during January, and we think the price consolidation will ensue.
Hence, our prediction that bitcoin will go above $50,000 may extend to March.