Bitcoin rallied on Thursday, bouncing off the $30K level and rallying nicely as buyers stepped in in response to the Gamestop/Robinhood fiasco. Market sentiment is extremely hostile towards Wall St. and legacy investing entities right now, and with Bitcoin and crypto as a whole a natural alternative to traditional stocks, this could be the catalyst we've been waiting for to take Bitcoin higher.
(January 28, 2021 7:30PM EST)
Outlook:
Bitcoin turned around on Thursday, bouncing off the $30K level and grinding up towards the $34K to end the day, closing near the highs as Bitcoin benefits from livid stock traders being fed up with the system look for a viable alternative that's not systematically manipulated like hedge funds and trading platforms clearly colluded to suppress Gamestop prices. In the grand scheme of things, what these Robinhood and Gamestop traders are experiencing right now is the same despair that Satoshi Nakamoto experienced in 2008, and hence, birthed Bitcoin. We are all seeking a deferral from the traditional financial system and, accordingly, created a new one: Bitcoin.
If we see an inflow of even a fraction of the bullish liquidity that has boosted Gamestop and other stocks' prices up hundreds of percent over the past week, then Bitcoin could be lifted to the ATH -- and higher. Today's close above yesterday's high is certainly encouraging; let's see what happens afterhours and into tomorrow. If it continues, we should look for higher closes; above $35K, and then above that. Higher highs is now the name of the game. One thing's for certain; people are fed up with the legacy financial system; it's time to embrace a new one that's been building and growing over the last 10 years.
Primary/Alternate Views:
As you can see in my chart above, based on today's price action, I think we surprisingly may be following the alternate path and have already put in a bottom of this correction. My alternate view, in grey, would be if Bitcoin has already put in a bottom around $29K for this correction, a ~31% retracement from the $42K high, and we are now forming a bottoming pattern that should continue to trade sideways as we rebuild momentum to go higher from here.
Current gameplan:
In the meantime we're just playing the waiting game, continuing to DCA with small amounts on a weekly basis. It may seem expensive now but if the multiple longer-term models such as the Bitcoin Stock-to-Flow Model (S2F) below is of any indication of where Bitcoin is likely to head from here, it's up and by a lot. That being said, I think adding small amounts of Bitcoin here and especially on dips as well as even finding ways to earn Bitcoin however possible is a wise move before it's too late/expensive. By looking at the updated S2F model below, you can see the model portends Bitcoin will be valued at over $100K at the peak of this cycle, which we are rapidly approaching.
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.
Support: We're closely watching the $30K level which has been tested and breached multiple times over the past week or so. If Bitcoin falls below, look for support around $25K, and then $20K -- if we even get there (probably not but who knows?).
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.
