Bitcoin catapulted higher during the week ending November 22nd, initially pulling back before immediately finding support, successively forming consecutive higher highs throughout the week on the climb up to and just above $18,000, ultimately closing the week near the highs. Bitcoin has now gone parabolic on the weekly chart, having now printed seven consecutive bullish candles and appears to defy gravity despite repeated calls for a pullback; however, we've seen this pattern before and know better than to expect this parabola to continue indefinitely.
(November 22, 2020 8:00 PM EST)
Outlook: Bitcoin broke out further last week, finding support at the $16,000 level and rocketing up above the $18,000 level, forming an exceptionally bullish weekly candle that puts an exclamation point on its recent bullish sentiment. While I am extremely bullish Bitcoin in the medium-long timeframes, it goes without saying that Bitcoin is overbought to the upside. I've been saying this for days now, but make no mistake: I am not a short-seller or even a seller of Bitcoin at this level whatsoever. If anything, I think this level is a sensible level to take shorter-term profits for traders, if nothing else. However, I do think between here and $20,000, Bitcoin is due for a pullback of some degree to digest some of these gains.
That's not to say it will be very deep of a retracement, as recent analyses shows that Grayscale Bitcoin, PayPal, and others have been accumulating Bitcoin at unprecedented levels lately to satisfy the recent surge in institutional demand for Bitcoin and Bitcoin products. Apparently, of the 900 Bitcoin that is mined each day and added to the circulation, a majority percentage of that is soon thereafter purchased and stored by Grayscale, PayPal, and other institutions. Similarly, some exchanges have been suspected of having to borrow or buy more Bitcoin from other entities in order to satisfy purchase orders and custody, indicating a market-wide shortage of Bitcoin. This comes as no surprise with a programmatically diminishing token supply and an exponentially growing demand. Legendary Bridgewater Founder and investor Ray Dalio recently took a more neutral and open-minded stance towards Bitcoin, tweeting that "he'd love" to be proven wrong about how Bitcoin is an effective store of value, a valuable macro investment portfolio allocation, and medium of exchange.
It's amazing how quickly the tides have turned over the last eight months. Back in March, Bitcoin got crushed during the COVID-19 crash, dropping to $4,000 before bouncing alongside equities, in what many thought was a squashing of the potentially brewing bull market. Institutions were, at the time, much more conservative, and no public companies of note had proclaimed or backed adding Bitcoin to their balance sheets, and there were trillions less of fiat in the global economy. Though I don't suspect this current run will continue unobstructed, I think after a near-term pullback alongside even more extremely overextended equities markets, Bitcoin will go on to have a record-setting 2021, hitting a new ATH by Q2 2021 and finishing the year at a multiple of current prices.
Support: Look for value below around $16,000 or $14,000 if we're lucky. This is a buyer's market; I'm not short-selling, and not even selling, at least this year nor probably the next. I don't think we fall to the $12,000 level, but if we do I think that's a tremendous long-term price point to add with little risk. At this point, $10,000 is ironclad support; I'm not sure Bitcoin ever gets below 5-figures ever again.
Resistance: $20,000 is resistance as the previous ATH and a large, round psychological number. At this point, I think 99% of all December 2017 retail investors have capitulated or escaped their positions, which clears a bit of selling pressure. That being said, I think this blowoff top probably reaches up to $20,000 before getting rejected, at least once, resulting in a coinciding pullback alongside equities markets. Given all the bullish variables right now, I would not be surprised to see a short-term rejection followed by a short consolidation period into the new year and a new ATH in Q1 2021.
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