In this article, we are going to cover the bitcoin price analysis for the actual moment and see what we can understand from it. The following is the content table:
After a move that shook the world, Bitcoin had seen its second-biggest single-day drop ever, as we did mention in the previous article. Down around 46% in only a matter of hours, Bitcoin smashed through all anticipated support levels, testing numbers that were hadn’t seen since April of 2019. Ethereum had its worst single-day drop in history, dropping to around $96 before stabilizing at around $124.
Many are curious as to why the huge price drop, what this means for Bitcoin and how can we learn from this? While it was almost impossible to predict this from TA, a variety of factors have played into why we have seen such a panic sell-off in Bitcoin and what we can expect to see moving forward.
One of the things people do in these cases is going to play crypto casinos where emotions take the control – as we always say “Gamble only with the money you can afford to lose“. Thus, we advise you to take a self-assessment right before playing.
Traditionally the 20 WEEK EMA has continued to act as a bearish/bullish indicator for Bitcoin. Above the moving average, we see it act as support, propelling Bitcoin to retest previous areas of resistance and potentially new ATH’s.
Below it and we can observe steady downtrends that only reverse above once we get a weekly close above the 20 WEEK EMA. As a shock to many, Bitcoin has recently moved under the 20 WEEK EMA after breaking out of a descending wedge that extended back to June of 2019.
Ahead and shoulders pattern confirmed around the levels of $8500 and set a target to $6500. With any confirmed head and shoulders pattern, the target has a 51% chance of getting filled. With $6500 being major support we hadn’t seen broken since the hashing war that took place during Bitcoin Cash’s last fork, the general consensus was that if Bitcoin meets the target of $6500, it will almost definitely hold as support.
In addition, another sentiment was the fact that these levels correlate with the descending wedge Bitcoin had just broken out of. No one anticipated a drop below, and a waterfall drop all the way to levels of 3.7k. However, since breaking these levels, Bitcoin is now struggling to maintain levels at $5600, but has continued to persist with the logarithmic trend has held since its inception.
For us to see retests of previous highs and a new ATH, it is imperative we see a weekly close above the 20 WEEK EMA. Until we see confirmation that we can transition into a new bull trend, it is likely bitcoin will once again move back inside its previous descending wedge pattern, and possibly test levels as low as $3200.
Why the Drastic Drop?
In the midst of uncertainty and fear due to the Corona Pandemic, many people are acting out of emotion instead of logic and reason. As much as people don’t like to admit it, Bitcoin at present is still a speculative asset and will only solidify its use case once we see it act as a safe haven during times of economic instability.
Many people are already attempting to debase Bitcoin, saying that it has failed as a safe haven because of this drop during the pandemic. However, it is imperative to remember that during previous market drops in 2008 and the dotcom bubble, we saw safe havens drop in value during the initial panic.
Back then and even now, gold and silver are dropping right alongside Bitcoin, and it is when the initial panic has died down and money is overinflated, we see a reallocation of wealth to safe havens such as Bitcoin and gold. With one of the worst market crashes since the 1980s, COVID is causing people to liquidate assets to cover losses, retain purchasing power and stock up on goods.
Is there any exception?
Bitcoin is of no exception to panic reactions and many people in Bitcoin are speculators that either day trade or don’t grasp the full understanding of the technology. With such an illogical and rapid drop in Bitcoin price, it is only true believers of the native token or ‘Hodlers’ that remain and are in it for the long game. Bitcoin at present is immensely oversold, hovering at around $5200 at the time of writing.
With the Bitcoin halving slowly approaching, and governments attempting to stimulate the economy through massive amounts of money printing and the lowest fed rates to ever exist, basic economics points to the fact that yield inversions will soon ensue, hyperinflation is more than likely, and the excessive printing of money will steal purchasing power from all those holding fiat currencies.
Make no doubt that Bitcoin at a price for anything less than $8500 is an absolute steal, and when everyone else is fearful and assets are highly undervalued, it is at this moment when smart investors must be greedy. Bitcoin currently is the hardest form of money and is the perfect asset to store wealth, or still a good way to play at one of the bitcoin gambling sites out there. It cannot be inflated past 21 million and will continue to act as a deflationary asset.
After the initial panic has subsided and people look for new ways to store their wealth, Bitcoin will garner a lot of interest and grow in market cap once people gain a better understanding of what it actually is.
The stock-to-flow ratio model is a ratio that evaluates how much of a commodity that is available against the flow of new products. Every 4 years or so, an event known as the halving reduces the reward miners receive by adding a block to the blockchain by 50%. With a hard cap of 21 million, this not only makes Bitcoin a form of hard money like gold and silver but the hardest form of money.
Hard in the sense that more Bitcoin cannot simply be printed like fiat currency and representative of the fact that each Bitcoin will continue to hold intrinsic value, not susceptible to inflation. At present, miners gain 12.5 Bitcoin for each successful block added, with the reward to be cut in half once again sometime in May this year.
Recent Fed rate cuts and large amounts of quantitative easing have continued to introduce fear and uncertainty into some of the largest global economies. Many people expect things to only get worse for the stock market and we will continue to see many liquidate assets as they prepare to hold cash for any ensuing emergencies.
The biggest incentive to hold Bitcoin in 2020 is anticipating where these individuals will plan to reallocate their funds. As the yield inversion occurs and long-term bonds become useless, people’s 401k’s are diminished and people lose trust in the current financial system, Bitcoin acts as a financial hedge and a deflationary asset that can’t be manipulated by a single entity.
What We See for the Future
Given the fact that bitcoin has followed a logarithmic trend and closely matches the stock to flow model, the lowest anticipated point Bitcoin will touch is around $3200. The fundamentals of bitcoin haven’t changed and we should continue to look at the bigger picture for what’s possible in the near future with the halving right around the corner.
Historically, the price action after the halving has brought us to new all-time highs and periods of exuberant growth. Following the logarithmic trend, Bitcoin is almost destined to surpass its all-time high in Q4 of 2020 confirming a new bull run and a redistribution of wealth. The next all time high for Bitcoin is predicted at the range of $150,000 to $250,000 and is likely to occur sometime in 2021.
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Remember that whether you buy Bitcoin at $3200, $5200 or $6500, you will look like a genius to those around you in the ensuing months and years. Adhering to the fundamentals and seeking opportunity when others are blinded by fear are key traits of the wealthy and successful. The world’s greatest investor said it best. “Be greedy when others are fearful.”
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