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Bitcoin: Waiting For Another Big Rally? Think $20,000 First

By Investing.com (Barani Krishnan/Investing.com)CryptocurrencyJan 27, 2021 05:03AM ET
www.investing.com/analysis/bitcoin-waiting-for-another-big-rally-think-20000-first-200557197
Bitcoin: Waiting For Another Big Rally? Think $20,000 First
By Investing.com (Barani Krishnan/Investing.com)   |  Jan 27, 2021 05:03AM ET
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Whether it’s the drool-worthy action in GameStop (NYSE:GME) shares or incessant stories of more crypto regulation, the retail mania in Bitcoin seems to have suddenly gone poof.

After Friday’s near $2,200, or 7%, boost that might have enthused at least some into thinking the Big B of the digital coin world was back, activity has slowed again.

At Tuesday’s close, Bitcoin had given back almost $550, or 1.7%, from last week’s close to stand just shy of $32,520. Sure there was Monday’s intraday high of nearly $34,700. But it was hardly the epic stuff of the first ten days of January when it rose 46% to record highs above $41,000. Bitcoin achieved in those ten days what it took the alt-currency whole months in December and November to accomplish. The majority of “alt”, or alternative, coins have also faded from recent all-time highs.

So, what’s happened?

This Rally Needs Fresh Drivers, Really

Well, for one thing, recycled news of ballooning US fiscal deficits, debt and inflationary pressures alone don’t seem enough to drive Bitcoin into a frenzy like they did just weeks ago.

Remember the story that cryptos are safer than safehavens like gold for anyone wishing to hedge against fiat currencies? Well, everyone’s heard that now. And fewer are subscribing to it, after the actions of the past three weeks, or buying Bitcoin on that reason alone.

Regulation, or rather, fear of it, is another thing.

Bitcoin got hit by a wave of bad press at the end of last week when the Direct Selling Association of South Africa asked the African Union to initiate a continent-wide effort to stamp out Ponzi schemes that could target cryptos.

Bloomberg reported on Tuesday that South Africa’s finance-industry regulator wanted to be able to fully prosecute perpetrators of fraud and oversee dealing in cryptocurrencies.

Regulation, And More Regulation

Newly-minted US Treasury Secretary Janet Yellen did not mince her words either, saying that while Bitcoin and other digital currencies provided some benefits, “many are used, at least in a transaction sense, mainly for illicit financing."

She added:

"I think we really need to examine ways in which we can curtail their use and make sure that money laundering doesn't occur through those channels."

And Gary Gensler, President Biden’s pick for the role of Securities Commission Chairman, is expected to have a similar role at SEC as his previous assignment at the Commodity Futures Trading Commission: bringing order to a largely ungoverned ecosystem.

Combined, these were enough to unnerve even the most ardent crypto bulls. Punters want to make fast, not slow, money, and they want to make it safely too. There's also speculation that some of the Bitcoin crowd may have migrated to GameStop, as shares of the video game retailer rocketed a lunatic 740% over the past three weeks.

Not all Bitcoin news has been negative either. This week, Coindesk.com, citing sources, reported that Harvard, Yale, and Brown have been buying Bitcoin for at least a year. News that America’s top three Ivy League colleges could trust part of their endowment money on Bitcoin must have felt like a ray of sunshine piercing through the dark clouds of regulation hovering over the crypto space.

So, what will take it to bring the Bitcoin rally back?

A Real Good Bargain Will Help

Like any market, good positive developments or stories will help Bitcoin crawl out of the hole it’s in. If not, a good bargain will.

Ed Moya, who tracks the crypto space in his daily markets roundup for online broker OANDA, thinks Bitcoin needs to fall below $30,000. He says the regulatory headaches for Bitcoin aren’t going away, but the price isn’t collapsing either for it to generate a new wave of buying, and that’s a problem.

Federal Reserve Chair Jay Powell, who will hold his monthly news conference at 2:00 PM ET (19:00 GMT) Wednesday, might trigger a bigger sell-off in Bitcoin if he ends up voicing more optimism than expected in the pandemic-hit US economy, said Moya. He adds:

“Bitcoin seems poised to consolidate a little more, but if the Fed is not dovish enough and the dollar rebounds, the $30,000 level could easily break.”

If Not A $30,000 Low, Then A Bottom Of Around $20,000

Greg Michalowski at ForexLive concurs with Moya, saying on Wednesday: “The price needs to crack below Sunday's low and today's low of $30,830.”

BTC/USD Daily
BTC/USD Daily

Sunil Kumar Dixit of SK Dixit Charting in Kolkata, India, is, meanwhile telling Bitcoin proponents to brace for an even lower bottom—of just above $20,000—if they wish to recapture the mania of November through the first 10 days of January. Adds Dixit:

“Without a crash, the upside for Bitcoin is conditioned by its ability to hold above $32,500-$33,000 for next above $35,500-$38,900. This can accelerate the upside momentum for a big leap toward the $50,000 station.”

“But I’m more of a believer that the path of least resistance for Bitcoin now is lower. If so, we’ll see sellers breaking below the 50-Day Exponential Moving Average, which sits at $30,000. This can strengthen the correctional path to below $27,500, taking it eventually to the 100-Day Simple Moving Average of $22,800 and the 20-Week SMA of $20,500.”

BTC/USD Weekly
BTC/USD Weekly

All charts courtesy of S.K. Dixit Charting

Ambrose O'Callaghan, posting on Motley Fool, said Bitcoin’s daily chart showed a ‘gravestone doji’ forming as early as Monday. Like OANDA’s Moya, he thinks the dollar’s performance will be key to determining Bitcoin’s comeback, especially as President Biden pushes for his $1.9 trillion coronavirus stimulus plan. Adds O'Callaghan:

“North American stocks are still scorching hot, even as the COVID-19 pandemic continues to devastate much of the economy. Investors should closely watch the behaviour of the US dollar, especially as the highly anticipated stimulus package looms large. The market reaction to this package may shape Bitcoin’s trajectory past January.”

Investing.com’s own Daily Technical Outlook for Bitcoin calls for a ”Strong Sell.”

Should the contract extend its bearish trend, a three-tier Fibonacci support is forecast, first at $31,609, then $31,569 and later at $31,504.

However, should the trend in Bitcoin turn positive, then a three-stage Fibonacci resistance will likely form, first at $31,739, then $31,779 and later at $31,844.

In any case, the pivot point between the two is $31,674.

Instead of concluding with my usual counsel that investors temper chart outlooks with fundamentals and moderation, I will append O'Callaghan’s caution on how Bitcon investors should proceed:

“It has been fascinating to watch the bull market for cryptos over the past six months. Still, investors need to be extremely cautious in this environment. Those who want to jump in on the Bitcoin craze should view it as a long-term pledge at this stage. Markets are overheated right now, and Bitcoin has burned newcomers before.”

Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. He does not own or hold a position in the commodities or securities he writes about.

Bitcoin: Waiting For Another Big Rally? Think $20,000 First
 

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Bitcoin: Waiting For Another Big Rally? Think $20,000 First

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Comments (18)
SunilKumar Dixit
SunilKumarDixit Feb 07, 2021 3:24AM ET
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Heading for the next record high of 43600
SunilKumar Dixit
SunilKumarDixit Feb 07, 2021 3:24AM ET
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Touched 44700
francisco reynoso
francisco reynoso Jan 29, 2021 6:13PM ET
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I think you forget a 0. Is going up to 200000 no down to 20000
Sunny Ghuman
Sunny Ghuman Jan 29, 2021 12:02PM ET
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You prediction was good . 🙏🏼
Steven Angelo
Steven Angelo Jan 29, 2021 11:40AM ET
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Opinions like this are garbage. Nobody can predict BTC prices short term. Here it is just 2 days later and BTC trading at $37K+
The Chad Bull
The Chad Bull Jan 29, 2021 6:18AM ET
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Will you be my dad?
agnasola helene
bryfuture Jan 28, 2021 12:50PM ET
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Luis Angulo
Luis Angulo Jan 28, 2021 8:07AM ET
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Just watch what happened when China or India tried to regulate crypto! Impossible. People are tired about WS and Gov. Just watch Gamestop
Barani Krishnan
Barani Krishnan Jan 28, 2021 8:07AM ET
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GMO just getting creamed today as brokerages put the freeze on trade.
Gay Bear
Gay Bear Jan 28, 2021 8:07AM ET
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Barani Krishnan  I don't know about GMO, but GME up 35% after hours
Benjamin Kang
Benjamin Kang Jan 27, 2021 2:47PM ET
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Fear of regulation... it's the only asset they can't regulate
Barani Krishnan
Barani Krishnan Jan 27, 2021 2:47PM ET
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That's the fear ... of the central banks.
Bekir Erdem
Bekir Erdem Jan 27, 2021 2:38PM ET
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The question is ; if I sell it what am I going to invest in. This is the new age of finance... The regulaton of individuals... we have to get used to live with this...
Barani Krishnan
Barani Krishnan Jan 27, 2021 2:38PM ET
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Valid question. Some middle ground will have to be found.
JP BUBU
JP BUBU Jan 27, 2021 12:30PM ET
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30000 already reached, short term corrective (only recovery) providing selling opportunity for a retest of former lows (29500 area),  ahead of 27426 (38.2% Fib ret of the 3850-42000 move) Triangle target @ 23590 still alive. Fasten your seat belt...
Barani Krishnan
Barani Krishnan Jan 27, 2021 12:30PM ET
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Thanks for the update, JP Bubu!
Invest Right
Invest Right Jan 27, 2021 12:26PM ET
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Thanks Barani. You should write about crypto more often. Under the surface, the Tether volcano simmers. Now with another 30-day extension, we are sure to see more volatility around that time. They've simply delayed the inevitable. That's another big reason I don't expect any meaningful rally for at least 30 days. In fact, I expect whales to cash out to protect their gains because the likelihood of the Tether story turning out to be positive is small.
Barani Krishnan
Barani Krishnan Jan 27, 2021 12:26PM ET
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Invest Right, thanks as always for your valuable feedback. Indeed, this is a space to watch, and I'll be back with correlations to gold/dollar the next time. Bests.
cran Vivid
cran Vivid Jan 27, 2021 12:04PM ET
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20k is a long order and I wouldn't bank on it...but who knows...we shall see. I would personally welcome that...but personally be happy anywhere between 25-28K (IF that happens)
Barani Krishnan
Barani Krishnan Jan 27, 2021 12:04PM ET
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Cran Vivid, it's still early in the day, as you suggest. Let's see!
Matt Novakovich
Matt Novakovich Jan 27, 2021 9:25AM ET
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I bought GMO at 25$ would you say it's a sell now? I have about 24,000 shares
Barani Krishnan
Barani Krishnan Jan 27, 2021 9:25AM ET
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Well, looks like you're on your way to millions, congrats! Not sure when that bubble would burst, Matt, but cash out when you can. Bests,
Murali Brahmandam
Murali Brahmandam Jan 27, 2021 9:07AM ET
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$2000 not 20000
Barani Krishnan
Barani Krishnan Jan 27, 2021 9:07AM ET
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Even better, Murali! :) How are you, by the way? Not into gold these days?
cran Vivid
cran Vivid Jan 27, 2021 9:07AM ET
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Oh well, Why not...In that case I would through a safer number like 2$ to catch up for myself being behind on this 10 years :D
Golden Berg
goldenberg Jan 27, 2021 8:59AM ET
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If you cannot do proper due diligence on any investment you are planning to buy, don't buy it. Bitcoin is one tricky pony that no one understands fully. That's why it's a nice platform for scammers. IMO, there is no bright future for bitcoin until the whole world accept it as a currency.
Barani Krishnan
Barani Krishnan Jan 27, 2021 8:59AM ET
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Agree, Goldenberg. I think the forays by Harvard, Yale and Brown are more blockchain and novo-tech related, rather than chasing returns.
Casino Crypt
CasinoCrypt Jan 27, 2021 8:28AM ET
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The FCA report Jan 11 was a simple, coded statement basically saying close your long positions and sell because you will be losing money shortly. A rare official statement like that should never be ignored.
Barani Krishnan
Barani Krishnan Jan 27, 2021 8:28AM ET
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True, Chris. That really strengthens the "get-out-now" argument. Thanks for bringing it up. I somehow overlooked it.
Gary 經絡科技
Gary 經絡科技 Jan 27, 2021 8:24AM ET
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hopefully it dips so I can buy more.
Barani Krishnan
Barani Krishnan Jan 27, 2021 8:24AM ET
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It should, Gary.
Sunil Kumar Dixit
Sunil Kumar Dixit Jan 27, 2021 8:24AM ET
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The journey south continues amidst 'Sell All' frenzy.....
Barani Krishnan
Barani Krishnan Jan 27, 2021 8:24AM ET
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I'm with you on that, Sunil. Thanks for your illuminating guide! :)
Barani Krishnan
Barani Krishnan Jan 27, 2021 8:24AM ET
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And charts as well :)
 
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