The million-dollar question nowadays is where the Bitcoin price is heading and what is the top of the current bull run phase. Tesla has sold part of their portfolio to take profit, and there are rumors about Facebook buying Bitcoin; hence there are many opinions and ideas. Do we copy history, or does history rhyme?
Fortunately, we have some great tools available which can help us to predict the future, but there is always the probability effect involved. As in life, nothing is guaranteed. The first tool is technical analyses, and the second one on-chain data reports. Technical analysis charts are handy and used typically by traders long time. As per the on-chain data, this is new and specifically related to cryptocurrencies since all data are transparent and available on the blockchain. Here is the Youtube version of the blog.
Is the history repeating?
I have to emphasize that Bitcoin cycles are connected to the halving, which occurs every four years and reduces the amount of newly mined bitcoin added to the circulation. The latest halving was in May 2020, and the next one is estimated to happen around June 2024.
This is the reason why the whole crypto community compares the historical price development.
When we look at the Bitcoin price in 2013 and 2017 scaled to today’s situation, there is a simple prediction as you see in the chart above, which results in the Bitcoin price top between $300 000 – $500 000 around the middle of September 2021. This date is based on days (290) since 100 % recovery of previous ATH until 70 % drop after new ATH. According to the chart, we are still far away from this bull-run Bitcoin price top.
The current Bitcoin situation
Bitcoin started its parabolic growth in September 2020. And from that time, we have been experiencing a run without any major pullback compared to the 2017 bull run. It is a good habit that every healthy growth needs a pullback, and in the case of Bitcoin, we happened to see at least the retest of 21 weekly EMA as shown in the chart below in the yellow ellipses.
Compared to the current bull run, we are still far from retesting these levels, indicating the differences. It is clear with all the news coming out that this bull run is not retail-driven, but institutions are the main trigger. As you can see from the chart, September 2020 was the last time we touched the 21 weeks EMA.
What does the Bitcoin on-chain data say?
On-chain analytics refers to a range of metrics observed by looking at data provided by blockchains. We could access this information ourselves by running a node for the desired network and then exporting that data. Fortunately, many websites do this for us. I will look at one example today to show you the example. The on-chain data indicators will be the topic of a separate article.
Exchanges inflow & outflow
By tracking inflows and outflows, we can see whether big money moves coins onto exchanges in large quantities (suggesting that they plan to sell the coins). Transferring stable coins onto exchanges suggests that they plan to buy the dip or whether a large number of coins are moving off exchanges suggesting that they plan to hold coins in the short term.
For example, Bitcoin experienced a pullback of around 20 % from its ATH of $ 65 000 and was approaching even the 21 weekly EMA around $ 43 000. Afterward, this information came out about the huge inflow of stable coins into the exchanges at the highest level from February 2021, as seen below.
Long – term view
I am definitely bullish for Bitcoin and the whole crypto market in the long term. Calculating the overall crypto market capitalization, which is currently at $2 trillion and comparing it to other investment assets, is still very low. Only the Bitcoin market capitalization is $1 trillion, and the gold market capitalization is at the $ 11 trillion levels.
Compared to other assets like overall stock, bonds, or real estate, it shows an even bigger space for growth. We can not ignore that cryptocurrencies are technologies and will bring many other useful use cases supporting world adoption. This will affect the price.
I can not skip the famous Gandhi quote.
It’s not a question if but when and the cryptocurrencies will be all around us without knowing it, and I believe life will be easier.