Firstly, congratulations to everyone on the new all-time high and $20k / coins.
HNWI, institutions, and corporate treasuries crawling out of the woodwork and relaying their large allocations to Bitcoin is something we all thought might happen at some point and would be what was necessary to take Bitcoin to the next level and… well, here we are now in price discovery.
The Difficult question comes as to what happens next; will money flow continue, in what capacity and, with what momentum.
What we do know is that Microstrategy just received an oversubscription to their debt issuance of $250 million over and above the $400 million they were looking to raise, which is probably a good indication of the demand for an interest yielding hard asset-backed product amidst a backdrop of continued dollar depreciation.
This is alongside the fact that the large players accumulating are hugely unlikely to have a time short-term time horizon with the asset (or at least that is what we are led to believe). On that basis and the basis that buying a new all-time high is something that some investors like to do, then we are looking to be in superb shape for 2021.
The most imminent challenge now is to try not to gloat around the Christmas table too much with “I told you so-isms”
Short term, Bitcoin had the impulsive breakout, initially stopping at 20800 which was the AB=CD target before finally reaching the consolidation target earlier today which saw some rejection.
This was largely fuelled by Open interest topping out and then facilitating a squeeze up which we saw yesterday. I am assuming this was mainly spot cover in capitulation.
The Funding rate has now spiked, it is difficult to borrow USDT on Binance, and derivatives are now leading spot prices on average. Additionally; we know that Saylor was doing a lot of his accumulation for Microstrategy via Coinbase and this led to a Coinbase spot premium which is no longer visible. Each of these things points to a pause in the market.
A correction back to the ATH breakout zone would be a 61.8% retracement of yesterday’s move. I am far more interested in gearing up back down at these prices. It is also back at the weekly TWAP/VWAP which have proven to be reasonable places to bid recently, partly presumably because they are working in-hand with the intraday twap/vwap accumulation strategies that we have seen deployed in the run up to 20k. Therefore I am interested in this region.
Multi Timeframe / Predator
Multi timeframe Predator analysis has continued to prove to be successful in helping to ensure users are on the right side of the market; this was updated yesterday to include another layer of confluence into the algorithm with RSI, so users need to remove their script and re-add it to get the update.
Longer term view
Looking ahead to what appears to be an ever-accelerating market, it is difficult to consider beyond 12 months, but assuming we continue on the current trajectory, there is a disincentive to sell every day when the price is drifting up and price discovery can be wild so trying to establish some likely targets for profit taking are limited beyond historic and human behaviour.
Looking at Fib levels in the last cycle, the 2.618 (then c.3k today c. 45k) and 4.618 (then c.5k today c.80k) are obvious places to look for larger corrections, but even in the last cycle, we needed FUD events to ignite the fear needed for spot holders to sell. I do think that similar things will play out this time because of the way the human mind works – i.e., at 3k – holders were 3x ATH, and 5k it was 5x ATH. The fib levels this time are lower in multiple terms, but the $ value reward will be even more meaningful to long term holders this time around.
Bitcoin is currently doing a latter cycle move in terms of length of move-in time and price. In the last cycle, breaking the 23.61% level of the log trend is what ignited the secondary phase of the parabolic move, so sustaining above 20k will be of real significance in the medium term.
Assuming Bitcoin completes the cycle at the previous pace and respects the log channel, 100k – 140k by the end of next year looks feasible, but as I say we are moving faster than the previous cycle (RIP “lengthening cycles narrative”).
The most bullish outlook is that we rip and do another 20x like the previous cycle which puts us across $300k and some way towards the cap of gold (c.$500k/Bitcoin at current prices). This would be a real paradigm shift and seems very unlikely, but after 2020 anything seems possible.
What we do know is that it is time to buckle up and enjoy the ride.
If you would like to join the Decent trader Team and community as we march into the exciting year ahead, you can do so here.