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Bitcoin Tracking Stock-To-Flow Model? (1/31/21 Weekly Forecast)

Bitcoin sold off during the week ending January 24th, dropping below the $30K level before finding support, ultimately closing the weekly candle around $32,000. This is a large bearish candle as Bitcoin accelerates its short-term correction off the highs around $42,000, pointing to lower prices yet to come before we find a meaningful bottom. 


(January 24, 2021  7:30PM EST)

Outlook: Bitcoin sold off again last week, putting in a lower high and lower low to reach under the $30K level, recovering to just above $30K. Bitcoin is probably halfway through reverting back to the mean if not more, drifting lower and seemingly targeting the mid-to-high $20,000's. Seeing as how Bitcoin tends to make exaggerated moves in both directions, I think a moderate retracement here makes sense, probably down to at least the 38.2% Fibonacci retracement level at ~$28K (as shown in the weekly chart above) which we nearly grazed late last week, or more likely the 50% fib down to around $25K where an army of buyers should be more than happy to step in and buy the dip.

Of course, Bitcoin could go lower than that, possibly spiking as low as $20K, which technically would be very clean as a test of previous resistance turned support, though I suspect there will simply be too much buying pressure once Bitcoin breaks below $30K and then $25K to let the sellers take us that low. Given what we've seen from Bitcoin historically and now again 2020-2021, why would anyone short Bitcoin, especially when it's in a clear uptrend that's possibly more powerful than any other Bitcoin bull market we've seen in the past? 

Six-Digit Bitcoin Prices: Stock-to-Flow Creator Says BTC Value Model 'On Track Like Clockwork'

As far as price targets go, I think it's only a matter of time before BTC hits $50K, $75K, and then $100K, the first of which we will almost certainly see in H1 2021. As you can see in the updated Stock-to-Flow model above, I think Bitcoin recovers in the short-term back up to the current ATH to test the ~$42K level, parries a weak technical rejection, and then breaks higher to continue to $50K where Bitcoin will achieve the $1 Trillion market cap for the first time. 

Now, based on my traditional market and equity analysis, gold has been weak lately as the US Dollar has been strong, both bearish factors for Bitcoin, although it looks like gold is in the process of putting in a longer-term bottoming pattern following its sizable 2020 rally. That being said, I think any such Bitcoin correction will be a fantastic opportunity to buy the dip and medium-long term value as Bitcoin resumes higher to end 2021 and enter 2022 with eyes on $100K. Anyone with an eye to the future would be wise to buy Bitcoin on dips or even earn Bitcoin however possible before it's too late/expensive. 

A lot of people aren't aware of how institutional investors and hedge funds operate, but because they have a lot of compliance, risk management, and quarterly earnings that keeps them honest, many institutions are unwilling or unable to invest in asset classes (crypto) with small market caps (crypto in 2019). What does this mean? As Bitcoin gets bigger / more expensive, more funds can justify or even meet the base criteria for taking initial Bitcoin positions. In other words, the biggest Bitcoin and Bitcoin's market cap get, the more institutional investors will buy-in. 

Support: Look for support around the $30K level, which is under pressure and has already been breached once, then the 38.2% fib at $28K, 50% fib at $25K, and my absolute floor is $20K at this point. I think a brief pullback to $25K is more reasonable and will provide a healthy discount to what will almost assuredly an exponentially higher future valuation. 

Resistance: Look for resistance at large, round psychological numbers in $5,000 intervals: $40K, $50K, etc. I imagine $50K would be strong resistance, although the bigger Bitcoin gets the more legitimacy it gains = more institutional investors can justify taking initial positions. 


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