Just before the weekend, the price of bitcoin broke another record, with a new all-time high near $42,000, according to CoinGecko. Today, however, BTC/USD has been crashing.
Even though the price of bitcoin is currently falling, it’s still up over 15% since last Monday, a sign there is still room for another significant drop, perhaps above 10%.
At the time of this writing, bitcoin was trading below $40,000, at $37,600. Since Friday, the daily volume remained mostly flat, close to $60 billion.
As we predicted on Friday, the price of bitcoin remained within the blue trading range, between $42,000 and $32,000. Not only that, but we were also correct in guessing the price would drop once it surpassed $40,000, as there would be new sellers entering the market. We elaborate on this below.
There was bullish news over the weekend, from Elon Musk, CEO of Tesla. Musk who wrote on Twitter that he would take bitcoin as a form of payment. Billy Bambrough wrote in Forbes:
“Elon Musk, (...) who has just become the world's richest man, has said he would never turn down being
paid in the soaring cryptocurrency bitcoin.”
As we have written in prior editions of the Daily Roundup, the more billionaires and
overachievers that join the bitcoin space, the more people will likely follow.
To conclude our introduction, we think the recent price move toward $40,000 attracted new sellers, however, we think that soon the short-term trend will reverse and pick up the pace towards $45,000 and above.
For now, we think BTC/USD might suffer an additional 10% retrace, before moving back above $40,000.
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 week comes from Bitcoin Jack, a bitcoin trader and market analyst.
In his post, Jack shares four charts that aim at finding bitcoin tops and bottoms. Let’s discuss the last two charts, courtesy of Glassnode.
The third chart shows the Bitcoin MVRV Z-Score or Market Value to Realized Value (MVRV).
According to Glassnode, the MVRV is “the ratio between market cap and realized cap.” It indicates when the price of bitcoin is below a “fair value.”
During 2017, the MVRV grew by 1,340% to reach an all-time high. This means that if the current price of bitcoin, at around $40,000, rallied as much as it did in 2017, it could surpass $270,000.
The second metric we want to discuss is the Bitcoin Net Unrealized Profit/Loss (NUPL) that we introduced last month. Glassnode describes the bitcoin NUPL as “the difference between Relative Unrealised Profit and Relative Unrealized Loss.”
Looking at the chart, in 2017 the bitcoin NUPL grew 1,400%. Currently, it’s almost hitting the blue “blow-off” top zone, which historically means the price of bitcoin could soon retrace.
However, in the medium term, the price of bitcoin could still move toward $300,000 if it follows the NUPL metric.
Nonetheless, current data shows that the market might be heading for a mini-bubble burst, as large players start to cash out.
The next update comes from Sven Henrich, founder of NorthmanTrader.
In his post, Henrich shares the weekly price chart of bitcoin since 2014. The trader adds the Fibonacci sequence from the 2017 top to the March 2020 bottom which shows that the current price of bitcoin is becoming quite overvalued.
When it hit $40,000, it touched the top of the last fib line. Henrich then adds the RSI above the main price chart.
What the RSI shows is that the price of bitcoin is hitting a new indicator all-time high, around 93.
The Relative Strength Index shows when an asset is overbought or oversold, an indicator that gives traders a range for when it's the best time to buy or sell.
The third post of the day comes from CryptoBirb, certified technical analyst, founder & CEO of the BirbNest, and co-founder of YellowBlock.
In his post, CryptoBirb wrote how he has been selling bitcoin for the past months, and how his average spot price was about $41,500. The trader explains how he thinks this is not the cycle top, but how he’s executing on his 2019 plan to sell at certain levels.
He concludes by saying something we constantly keep reminding investors and traders:
“unrealized profit is no profit.”
Just like we’ve discussed last week, we advise all market participants to put a thorough plan in place to maximize their return on investment (ROI) when unloading bitcoin for fiat currency.
Otherwise, one might miss the best selling opportunities.
Despite that, be aware that having no exposure to the bitcoin market might be as dangerous as not selling. Just as prices surprise us when they turn bearish, the same applies for bullish turns. One should always keep a small stash of bitcoin at hand, in case the price continues to rise much above our expectations.
The last tweetstorm of the day comes from Rafael Schultze-Kraft, whose Twitter profile describes him as a data scientist, on-chain analyst, and CTO at Glassnode.
In his tweet, Schultze-Kraft builds on the post we shared last Friday, from Raoul Pal, that compared the adoption of ether to the adoption of bitcoin.
Schultze-Kraft shares the Total Network Fees of bitcoin (yellow) and ether (blue) from 2016 to 2020.
In the span of four years the total bitcoin network fees grew from a few million to a top of around $550 million. Meanwhile, just last year total ether network fees reached a peak close to $600 million. As the trader wrote:
“Users spent almost $600M in fees on the Ethereum network last year – 83% more than on Bitcoin.”
Essentially, Ethereum is currently the most valuable chain, if we measure network activity in terms of fees paid by users. The reason? We believe this massive growth in fees happened due to the sheer volume in DeFi (Decentralized Finance) protocols, which currently has over $23 billion in Total Locked Value (TLV), according to Defipulse. From January 2020 to January 2021, the TVL in DeFi grew by 3,200% from around $700 million to $23 billion.
As we wrote last week, we think that ether has a greater probability of making higher returns than bitcoin. Therefore, a good way to increase your bitcoin holdings might be to diversify into high-performance altcoins, such as ether.
Bitcoin Price Prediction
Last week, the price of bitcoin had an epic surge of more than 17%, and it broke a new price record when it traded close to $42,000, according to CoinGecko.
In the past 24 hours, bitcoin’s price traded around ¥$37,600, according to CoinGecko. Not only that, but BTC/USD is up by more than 35% since the year started.
On Friday we predicted the price of bitcoin would make another move toward $45,000 and then retrace between 10% and 20%, below $40,000. That’s exactly what happened, even though BTC/USD did not quite reach $45,000.
We now expect BTC/USD to trade between $35,000 and $39,000 during the next few days until a horde of new buyers finds the bitcoin space.
Today, we discussed how many traders and macro analysts see the price moving in the short-term.
The answer is quite bearish. Most traders expect the price to fall further until it reaches a major support zone. Hence, most have been taking profits. We highly advise all investors and traders to follow a similar strategy as well.
While timing the market can be extremely profitable, it is extremely dangerous as well.
Posted Using LeoFinance Beta
