Bitcoin had a brief stumble below $30,000, but found a new wave of support, sparked by a $10 million “buy the dip” moment from MicroStrategy.
As the prospect of the Biden administration passing massive stimulus packages to help get the United States economy going again, conversations about Bitcoin becoming a reserve currency are beginning to pop up again.
Bitcoin’s recent volatility has some analysts saying BTC is a cyclical asset rather than a hedge, but the price recent movements have caught the eye of retail investors who have shown a renewed interest in cryptocurrencies in general.
CrossTower head of trading Chad Steinglass: “$31,000 was a pocket of strong support, so at least not everyone is selling. We’ll have to wait and see if that wall remains, or if institutions continue to accumulate. If they do, it’s likely that the trend will re-establish itself and continue. If they move to the sidelines waiting for more regulatory guidance, then their lack of buy flows will be acutely felt.”
Many of the top altcoins recovered nicely from this week’s correction. Polkadot rallied 7.09% to a daily high at $18, while Chainlink posted a double-digit gain and topped out at $22.31.
Valkyrie Digital Assets is the latest asset management firm to file a registration with the SEC to form a Bitcoin ETF, a bid that joins a crowded field of prospective fund managers looking to capitalize on renewed retail interest in cryptocurrencies.
Filed on Friday, the Texas-based family investment fund proposed listing the Valkyrie Bitcoin Trust on the New York Stock Exchange.
If history is any indicator, the filing’s chances of leading to a tradable fund are slim. During the last Bitcoin bull run, multiple firms attempted to throw their hat into the ring as at least nine entities filed proposals for a Bitcoin ETF with the SEC including VanEck, Direxion, and Gemini.
Kryptoin CEO Donnie Kim, whose firm filed for an ETF in 2019, previously said: “At this moment in time the commission is listening and learning about this new asset class and they are in a holding pattern, partly to understand the consequences of the existing products on the market and partly to look for further guidance under the current political landscape.”
Despite the commission’s historical reticence, as retail interest in cryptocurrency booms, fund managers are once again clamoring to be the first to offer an ETF product.
Despite Bitcoin price cooling off recently, with the cryptocurrency currently hovering around the $32,000 mark, it is still showcasing strong technicals as well as a thirty-day price gain of nearly 40%.
Even since its recent dip, which has seen the digital asset fall from its recently established all-time high of around $42,000 to its present value, the top crypto is still in the green over the last 12 months, exhibiting a value spike of nearly 300%.
Earlier this year, JPMorgan Chase’s strategy team claimed that a theoretical target of $146,000 is possible for BTC by the end of 2021, pushing the narrative that the digital currency seems to be a prime candidate for replacing gold as a long-term store-of-value, especially for a budding base of younger, more tech-savvy investors.
New data released by Pantera Capital reiterates JPMorgan’s sentiments surrounding BTC, suggesting that its price action is closely following the Stock-to-Flow model, and reaffirming its faith in Bitcoin hitting $115,000 by August 1.
When looking at the market sentiment surrounding Bitcoin, the digital currency is increasingly showing correlations with the core functions traditionally afforded by traditional fiat currencies for their users.
The price of Bitcoin recovered in the past two days after dropping to as low as $28,850. Following the rebound, however, BTC has been unable to break past heavy resistance at $33,000 on Jan. 23, and has now dropped back below $32,000.
The lack of premium on Coinbase is worrying for two key reasons. First, Bitcoin naturally trades higher on Coinbase due to the minor premium of Tether. Second, when Coinbase sees a lower price than other exchanges, it shows that there is high selling pressure in the U.S. market.
Analysts at QCP Capital, a team of traders in Asia, see several signs of institutional exhaustion: “We’ve done a timezone analysis which breaks down BTC moves into Asia hours vs. US hours (12 hours each). Since March last year, the clear pattern has been relentless US buying while Asian whales and miners have been on the offer.”
Bitcoin is at risk of a corrective phase throughout the first quarter of 2021 if institutional demand for BTC subsides. Various institution-focused platforms and vehicles, like Grayscale, continue to see large inflows which is indicative of solid institutional demand.
The likelihood of a wider correction remains if the U.S. market continues to see an overall decline in the appetite to accumulate BTC, particularly if the dollar continues to recover in 2021.
Chainlink continues to be one of the best performing cryptocurrencies over the past year. As of January 23, LINK is now bigger than Litecoin and number seven with a $9.2 billion market capitalization, after surpassing Bitcoin Cash earlier this week.
LINK’s price surge also coincided with rumors that Grayscale is preparing to add a Chainlink Trust product. This news likely played a part in the price of Chainlink rallying toward new all-time highs, making LINK, once again, one of the best performing cryptocurrencies.
The daily chart for Chainlink shows massive volatility in recent months, but also some beautiful price action. Every previous level of resistance flipped for support, after which the price continued climbing almost in textbook fashion.
The crucial level to watch for potentially more downside is the $17.30 area, as well as the $19.50 zone. This latter area is the previous all-time high in 2020 and possibly the point of the next support/resistance flip, which would be bullish for more upside.
The altcoin-BTC pairs have been waking up from their deep slumber in the past weeks, but it can’t really be called an “altseason” just yet. Altcoins must still consolidate and build up strength for the next leg up.
A chip shortage is significantly affecting the Bitcoin mining hardware distribution chain. Bitmain, one of the major Bitcoin miner makers, has seen its inventory sold out until August 2021.
Apart from being out of stock, Bitmain’s mining rigs are now at a massive price premium. Back in November 2020, the Antminer S19 shipped for $1,897 a unit. The same miner is now priced at $2,767 on the company’s website — a 45% increase.
Alex Ao, vice president at semiconductor manufacturer Innosilicon, said, “There are not enough chips to support the production of mining rigs.”
What little supply is available is reportedly being scooped by major mining establishments in North America.
Back in 2020, U.S.-based mining giants like Riot Blockchain, Bitfarms, and Marathon significantly upscaled their inventory with massive purchases from Bitmain and fellow rival MicroBT.
Chinese miners have also suffered disruptions of late, including a frozen card tide back in 2020 that prevented some operations from being able to pay for electricity.
Smaller mining operations additionally are in danger of being priced out of the market. Premiums on hardware, even second-hand rigs on top of the reduced block rewards, could significantly impact their bottom lines.
Bit Digital (BTBT), a Bitcoin mining company traded on the NASDAQ stock exchange, is the subject of a class-action lawsuit that alleges the company fabricated the extent of its Bitcoin mining operations.
The lawsuit alleges that Bit Digital misled investors and made materially false claims about the extent of their Bitcoin mining business, causing significant financial harm for investors.
The plaintiffs referenced an investigative report by J Capital Research that claims Bit Digital lied about having Bitcoin mining farms in operation across China.
The firm’s website claims to have over 40,000 mining rigs currently in operation, exerting a hash rate of 2,253 PH/s, having successfully mined over 1,500 BTC since the beginning of 2020.
Researchers at J Capital say they contacted government officials in the Chinese provinces in which Bit Digital claimed to operate, only to find that no one had ever heard of them.
The plaintiffs seek reparations for the 1,000 units of BTBT shares purchased at a price of $21.81 per share on Dec. 12, 2020, as well as any other compensatory damages, court fees and expenses.
The price of Bitcoin is continuing to reject the $35,000 resistance level, briefly falling below $30,000 overnight on Jan. 22. The $7,000 drop saw the biggest daily red candle ever.
BTC has since bounced back above $31,500, but it is currently on track for its worst week ever, losing over $5,000 in the past four days.
There are three main reasons why the price of Bitcoin dropped so steeply overnight. First, the options market was overheated with growing put options.
Second, a critical resistance area was rejected. Third, the speed of the sell-off possibly led to a panic drop in a short period.
Currently, the options market accounts for around 33% of the futures market’s open interest. With over $3 billion in open interest, the options market can have a significant impact on the price of BTC.
The $35,000 level was a critical short-term resistance area. As soon as BTC rejected the level, it quickly fell below $30,000. If the bullish structure remains intact, a rally back to $35,000 is a possibility.
As the price of Bitcoin dropped below $33,500, a panic sell-off ensued. The Crypto Fear and Greed Index plummeted to “fear” for the first time since October after spending months in “extreme fear.”
The price of Bitcoin fell to lows of $28,950 on Jan. 22 thanks to miners likely selling huge amounts of their holdings, but big buyers made sure that the dip was minimal.
The past few days saw vast outflows from mining pools, which in turn corresponded to BTC/USD shedding 20% in a week. By Jan. 17, daily outflows had reached 10,000 BTC ($313 million), these continuing for three days in a row before returning closer to normal levels.
F2Pool, currently the largest mining pool comprising of 15% of the total hash rate, appears to be responsible for the vast majority of outflows. This does not necessarily mean that miners sold BTC on the open market, but simply that they moved mined coins from their original wallet.
The numbers form a welcome counterargument explaining Bitcoin’s sudden price drop this week. Meanwhile, Bitcoin exchange balances have stayed constant throughout January in contrast to the general downtrend that has been in place since summer 2019.
Should the F2Pool coins form a large glut of new BTC supply for sale on the market, it is likely that asset management giant Grayscale will hoover them up quickly.
Grayscale has added conspicuous amounts to its assets under management this week, these potentially helping BTC/USD avoid a deeper dive.
Canadian Bitcoin miner Hive Blockchain has purchases 6,400 next generation mining machines from Canaan. The Avalonminer 1246 miners will add a combined 576 petahash per second (PH/s) to Hive’s existing hash power.
Hive’s total hash rate will increase to an estimated 1,229 PH/s with the new machines, which is well beyond the company’s original cumulative hash rate target of 1,000 PH/s for 2021.
Hive said the equipment will be delivered in eight tranches in 2021, with 500 miners delivered in May and June, and 900 miners delivered each month until year-end.
Hive said the latest purchase “is part of our continuing strategy to increase our bitcoin mining capacity.” For the December 2020 quarter, the firm mined 140 Bitcoin and over 22,000 Ethereum.
According to Canaan’s Web Store, the Avalonminer 1246 is selling for $1,450 each. The miner is the Chinese company’s most powerful range available and comes with a hash rate of 90TH/s.
A recent CoinMetrics report suggests that when a new altseason starts it will play out differently than the one that occurred in 2017. It notes that the arrival of institutional investors and their interest in Bitcoin and Ether has fundamentally shifted the cryptocurrency market landscape.
Staking, governance tokens, and the integration of DeFi are the primary drivers in this market as users want more involvement in the growth and direction of each project.
The DeFi has been incredibly attractive to investors who are looking for a more hands on approach to interacting with emerging blockchain projects. The sector is a clear driving force in the market and since Dec. 1 Uniswap, AAVE, Synthetix, MakerDAO, SushiSwap, and Curve have all outperformed Ether and BTC.
Cryptocurrencies that offer real world use cases that meet the sector’s demands and the ability to govern project decisions have emerged as the most desirable features for today’s retail investor.
Institutions may have chosen Bitcoin and Ether as their preferred investments but the battle for Layer 2 dominance between tokens that function as Ethereum alternatives is clearly where retail investors are placing their attention and this is what will drive the next altseason.
Over the past couple of weeks Bitcoin’s price has been in a complete spiral, falling from an all-time high of $42,000 to as low as $30,000 and is currently trading at just over $31,000.
But long-term bullish fundamentals remain in place, giving Bitcoin plenty of hope to continue its upside run with some analysts being convinced the price will soon retest $40,000 all over again.
BlackRock’s desire to launch cash-settled Bitcoin futures for two of its funds as well as GrayScale’s accumulation of Bitcoin are reasons for analysts to believe in Bitcoin soon retesting $40,000.
CryptoQuant CEO Ki Young Ju noted that spot inflows into the cryptocurrency exchanges slowed this week which signals an extended downside correction in the future. Despite that, Ju remains confident that Bitcoin will reach $100,000 this year, but projects a bearish outlook for the near term due to a lack of significant buying pressure from Coinbase.
Young Ju also added that in a worst case scenario, Bitcoin could drop as low as $28,000 in the short term.
Ethereum isn’t the only blockchain platform seeing a significant increase in value as the decentralized finance space continues to move in tandem with the booming cryptocurrency ecosystem.
Ethereum is currently the most popular smart contract blockchain app for developers and projects on which to build and launch apps and platforms. The DeFi space is intrinsically linked with Ethereum in its current state, with a large majority of the biggest DeFi projects and protocols running on its blockchain.
Polkadot is seen as one of the most prominent rivals to Ethereum. It’s a new-generation blockchain that connects private and public blockchains and networks. The project hopes to drive interoperability between blockchains to power a decentralized internet of the future.
Near Protocol is another smart contract blockchain platform that has been growing in popularity since its launch. Its native token, NEAR, has seen a rise of more than 100% and operates on its own proof-of-stake protocol that uses sharding, which Ethereum still has yet to implement.
Cardano also runs on its own proof-of-stake blockchain and its native token, Ada, moved past Bitcoin Cash to become the sixth largest crypto by market capitalization. It has yet to roll out functional smart contract capability but is expected to do so this year.
Bitcoin’s price has dropped more than 10% since Tuesday and fell below $32,000 for the first time in two weeks. With the pullback, more than $100 billion from the total market value of all cryptocurrencies was shed in the last 48 hours.
Ether, the second-largest crypto token by market value, is also down around 10% from two days ago which came after the digital asset hit an all-time high of $1,439 on Tuesday.
Bitcoin’s price is still up over 150% in the last three months however. Additionally, Blackrock filing separate prospectuses for two funds that may buy Bitcoin futures contracts is viewed as the biggest sign yet that institutional investors are flocking to the virtual currency.
Also helping Bitcoin is the narrative that it offers a store of value similar to gold in times of unprecedented economic stimulus, which some investors fear will cause a spike in inflation.
With new president Joe Biden now in office, there is an expectation that he will be distributing stimulus payments to Americans, which should boost Bitcoin, much like the first round of payments resulted in BTC spiking to highs not seen in a few years.
Analysts at JPMorgan Chase believe the Bitcoin bull market has put the flagship cryptocurrency on par with cyclical assets as opposed to a hedge against market stress.
Strategists John Normand and Federico Manicardi say anyone betting on Bitcoin as a portfolio diversifier is putting themselves at risk, calling Bitcoin the “least reliable hedge during periods of acute market stress.”
Normand and Manicardi added that “The mainstreaming of crypto ownership is raising correlations with cyclical assets, potentially converting them from insurance to leverage.” Cyclical assets typically refer to stocks that follow the trend in the overall economy, which means their performance depends on the business cycle.
The strategists acknowledged that the cryptocurrency may be suitable for investors worried about policy shocks and the systemic devaluation of fiat currencies which goes against the view of fellow JPMorgan strategists who believe Bitcoin is drawing investors away from precious metals.
Bitcoin remains a highly volatile asset as it more than doubled its price over a three-week period, going from $20,000 to nearly $42,000, before seeing a pullback in bullish momentum earlier this month. It has since corrected roughly $10,000 from its all-time high.
Bitcoin whales believe the start of a new bull cycle is imminent. The number of wallets containing over 1,000 BTC ($35 million) hits an all-time high.
164 new 1,000+ BTC entities have been created in 2021 alone, holding a combined $6 billion. These numbers feed into an existing narrative of wealth transfer which has characterized Bitcoin’s latest bull run.
While the 1,000+ BTC wallet category has increased recent times, smaller wallet holder numbers conversely are dropping.
Some have appealed to hodlers not to sell out to whales, while others argue these newly-minted big players will aggressively protect the value of their investment.
Bitcoin remains at a crossroads in terms of spot market price action. Trading in a corridor between $30,000 and $40,000 throughout the week. Looking ahead, however, indicators continue to reveal extreme bullish upside potential for BTC/USD.
After Bitcoin’s thermocap pointed to the price being in the early stages of a bubble setup, volatility now suggests that the market is just getting going on its gains.
Founded in 2015, Coinchapter.com has become one of the leading resources for the crypto asset community. Created by a small group of cryptocurrency enthusiasts, Coinchapter.com was built to provide new members of the crypto asset community with unbiased listings of cryptocurrency exchanges and retail options that would allow them to buy the crypto assets that they wanted, how they wanted and at the price they wanted.