Since the price of bitcoin (BTC) retested the $50,000 mark in early March, it has remained fairly stable above it. Even the decline in the last week of March could not be sustained as the bulls pushed the price to a new high at $65,000.
The argument that good news drives the market is an obvious one, as there is no doubt that we have seen a sort of FOMO snowball effect at institutions in recent months.
The bull market began in the last quarter of 2020, and the fact that prices suddenly jumped in October on the announcement of PayPal’s entry into the crypto space cannot be ignored. The rise continued as JPMorgan launched the long-awaited JPM coin.
MicroStrategy made a major purchase this year, backed by a $1.5 billion investment from Tesla. Major banks, including Goldman Sachs and Citigroup, have added credibility to the argument that crypto has its place as an established asset class by expanding their services to cryptocurrencies. More recently, the hype created by Coinbase’s listing on Nasdaq – the first of its kind in the cryptocurrency sector – has also played a role in keeping digital assets in the news worldwide.
At the macro level, efforts to gain approval for bitcoin ETFs from US regulators are also helping to bolster bullish sentiment. – However, according to an analyst, approval may take another two years.
Was $25,000 an institutional award?
While the theory that good news supports the price of bitcoin cannot by itself justify a long-term uptrend, the market action was clear enough for major investors and institutions to sit up and take notice. A report published in January by eToroX, which surveyed institutional players, seems to support this view.
The report concludes that BTC must reach a price high enough to be attractive to institutions, taking into account other barriers to entry, such as regulatory risk, fraud potential, and access to necessary infrastructure. One respondent went so far as to set a price threshold of $25,000. The current share price is more than sufficient to attract institutional investors.
Johnny Liu, CEO of KuCoin, also believes that underlying concerns about the state of broader markets play a role in the adoption of institutional cryptocurrencies, reports Cointelegraph : The recent rise is linked to concerns about long-term quantitative easing and global inflation. He continued to look inward, saying that the trading behavior on CuCoin shows that Western investors are more involved in this race, compared to their Asian counterparts.
This is because Western countries have been less resilient to the spread of COWID-19, leading to increased government spending and economic impacts. However, Robbie Liu, market analyst at OKEx Insights, said there is still a lot of interest from Asian investors. He pointed out that the desire to stagnate is a bullish signal:
In the Asian market, the USDT has also reached a positive premium since March, meaning that one USDT has traded above one US dollar. This premium also reflects the high demand for access to the cryptocurrency space.
When good news is not necessarily good news
The problem with the idea that prices are determined solely by positive sentiment based on headlines is that it provides no basis for long-term price stability. It’s simple: When the good news dries up, prices can start to fluctuate, creating a snowball effect similar to bad news in a down market.
With this in mind, it is worth considering some of the fundamental elements, both chain and non-chain elements, that can influence prices. There are many reasons to stay positive here. However, there are still fundamental factors that indicate that the bull market is far from over in 2021. Glassnode data shows that the amount of BTC held on exchanges is steadily declining, leading to a decrease in liquid supply.
Nonetheless, the number of addresses with more than 1,000 BTC recently hit an all-time high, suggesting that more whales than ever are choosing to board. Miners have also joined the trend recently, accumulating more BTC than they sell. According to the theory of market cycles, it seems inevitable that the bull market will eventually end – the only question is when.
All signs point to Hodling
Judging by sales activity, the peak is far from being reached. According to a recent report, long-term investors are reluctant to exit their investments, which usually happens in the second half of the market cycle when they are looking for gains. As such, this upward cycle is particularly unusual given previous price spikes. Profit seekers usually come out after a week to a month. In this case, it’s a hodling company.
The Hodl Coefficient chart produced also confirms this view, as it reliably correlates with all previous BTC macrocycle reversals. As you can see in the chart below, the booms market is about to peak when the ratio exceeds 50,000.
If history can predict the future, it will show that the bull market in this cycle is only halfway through, suggesting that BTC above $100,000 by the end of the year is within the realm of possibility. Jason Dean, a bitcoin analyst at cryptocurrency consultancy Quantum Economics, declined to give a price prediction. But speaking to Cointelegraph, he explained:
In the longer term, the continued decline in the amount of bitcoin available on exchanges is expected to play a significant role in determining prices, as more and more bitcoins are withdrawn for very long-term cold storage and the amount of new supply continues to decline, thanks to future reductions.
Igneus Terrenus, head of communications for the Bybit exchange, believes that the current speculation in the derivatives markets can tell us a lot about what to expect for the rest of 2021. He told the Montelegraph: With June, September and December futures trading at significant premiums, we can assume that the market is in an uptrend that will last until the end of 2021. He added that: In the long run, the price of BTC depends as much on fundamentals as it does on the strength of the [US] dollar.
$500,000 or more?
According to quantitative analyst PlanB, the stock market forecasts show that the bullish cycle is even earlier than the statistics show. The cross-asset model of chart analyst Situational Awareness has tracked previous rising cycles with amazing accuracy, and it is expected that this model will be no different than the previous one.
My favorite situational awareness card: S2FX for an approximate prediction of the long-term level (white line), combined with an accurate signal for the detection of bubbles within the chain (colored overlay). #InOrbeTerrumNonVisi pic.twitter.com/KZcZCzldgI
– PlanB (@$100trillion) April 4, 2021
Based on the current bullish and bearish signals, PlanB, using the S2FX model, predicts a 2021 high of $288,000. Nevertheless, the price peak in this cycle of falling bitcoin mining costs could reach $576,000, with an average peak in 2021 over the cycle.
If that sounds ambitious, consider that there is no precedent in bitcoin history for the kind of institutional inflows we are seeing now, let alone the lack of liquidity as investors seek to accumulate assets. Therefore, even the earlier bullish models may not be the most reliable predictors of this cycle.
Overall, strong fundamentals combined with persistent institutional FOMO sentiment give us every reason to believe that this bull market will continue for some time.
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