BTC broke down from a 3 month consolidation. What now? I have seen a lot of bearish low target charts pop up on my twitter feed. There is a lot to unpack after moving out of consolidation, but I find there is still reason to be optimistic going forward.
Fundamentals
I am one to believe that BTC and Crypto are still “Risk On”. What does that mean? Well basically it means that Crypto is tied in with the larger Macro environment. So, when the larger economy and macro outlook is good, BTC is in a position to do well. In theory, it will perform poorly in times of economic stress. However, BTC was invented just after the last financial crisis so we haven’t really seen how it will do during a recession or depression. If we get a breakout in equities (which I expect), I think we see Crypto do well also. BTC’s two best years were in 2013 and 2017 when the SPX had returns of 30% and 20% respectively.
I posted recently about the SPX and how it looks poised to breakout. If it does, I would expect the SPX to have another great year like 2013 and 2017 and likewise with BTC.
Eventually I could see BTC getting large enough to where it is “Risk Off”, but not for a while.
Halving Event
One of the biggest events every 4 years in BTC is its halving. That is when the mining reward halves. Currently, miners receive 12.5 BTC in a block, but in May 2020 that will go to only 6.25. Right now, 1800 BTC are mined every day. Next year after May and for the next 4 years after, only 900 BTC a day will be Mined. This all comes with the fact that most of the BTC already being mined. Over 18 million out of total 21 million.
So that covers the new supply coming on the market. Now lets just look at the demand. Brian Armstrong tweeted out Aug 15th that Coinbase was taking in 200-400 million a week in new crypto deposits coming from Institutional customers. That is 28-57 million a day in incoming buys. Cash App reported a record number (65.5M) of purchases in Q1 this year. That is roughly 700 thousand a day.
At current prices. If 900 btc are mined and sold that is 7.5 million a day. To me this says within the next couple years the sellers will not be able to keep up with the buyers, and that can only push the price up.
Technical
Today the 200 dma is at roughly 8300. In the past during bull markets, the BTC price has not spent any meaningful time below the 200 dma. To stay bullish, I don’t think the price can spend too much time below. Meaningful time below can put BTC at risk of a longer sideways reaccumulation period instead of a bull.
Bollinger Bands
On the weekly chart the bbands are starting to squeeze. Price is below the 20W (middle bband). This is a bit concerning, but as long as the price holds above the bottom bband the bull thesis is still intact. BTC has never breached the bottom bband in a bull market.
Horizontal Support
There is horiztonal support at 8200 as shown in the chart. If this breaks, I see support at 7400 as well.
Fibs
I have been looking at fibs from the ATH to the low. We just spent a considerable amount of time bouncing between the 38.2% and the 50%. Although price ultimately retraced to the 61.8% retracement, but the weekly never closed past the 50.
I also ran fibs from the low in January to the high in June. Running these fibs we can see where the 50 and 61.8 retracements are. Look for support at those two spots.
Order Blocks
There is a weekly order block where big time buyers would be looking to get more bids filled. Big time buyers need liquidity to buy so that they don’t drive up price too much when buying. There was quite a lot of liquidity below 9k and as you can see from the volume there was quite a bit of coin changing hands.
RSI
1D oversold is a good spot to buy in a bull market generally. It sits at 22 currently.
What to expect going forward?
Fundamentals are still bullish. Hash rate (strength of the network) hit an all time high last week. There was a drop recently, but it has since bounced back. Technicals are a bit more bearish, but not looking too bad. I still am expecting a bull market going forward and into halving.
As for buying. I bought some BTC yesterday at 8100 and would buy more if we reached low to mid 7k’s. I think these spots offer good risk/reward going forward for the world’s most asymmetric asset.
