At the time of writing bitcoin has found a steady level at $13k. It seems the euphoria is just beginning as fundamentals remain strong and short-term holders are getting out of the way. Corporations are now having meeting so that they may determine if bitcoin is right for them. We saw what retail investors did in 2017, now it’s time to see what institutional investors can do in 2021.
Profit-Takers
Bitcoin continues to shrug off increased selling pressure from profit-takers for the time being. According to Chainalysis, a total of 106,519 bitcoin was received by crypto exchanges on Wednesday. The pickup in exchange inflows can be a concern to bulls because it indicates that investors are rushing to take profits. What’s good for us is that bitcoin’s trade intensity has jumped to a 2-month high of 5.8. This is more than 2x of the 90-day average.
Bitcoin trade intensity, Source: Chainalysis
Trade intensity is a measurement of how any time an in-flowing coin is traded. Put simply, each of the 106k bitcoin sent to the exchanges was traded on average 5.8 times. With this, we can assume that the market had the capacity to absorb the selling pressure imposed on by the sellers.
Pullback
Although the mid-term outlook is positive, we have to expect a correction in the short-term. Where that fundamental support will be is anyone’s guess. A surge of 26% within 13-days is unsustainable, no matter how good the news is. What really sent bitcoin flying was the transfer in wealth from altcoins to bitcoin. Now all eyes are on bitcoin as the majority of bitcoin holders are in profit.
As we approach $13k, we must be cautious about the $14k resistance level we’ve had since mid-2019. In June 2019, when bitcoin hit $13,970, it quickly pulled back to $10.5k and then again to $9.2k 21 days later. It’s important to remember that low market cap means high volatility, so don’t be spooked when you’re down 30–50%.
Zooming out, bitcoin has not had 3 positive consecutive quarters since 2017. That year, bitcoin reached its all-time high of $20k and if history rhymes, then 2021 will be a great year for bitcoin.
Bitcoin quarterly returns in percentage. Source: Skew
“Like Investing Early in Apple or Google”
Famous Wall Street investor, Paul Tudor Jones, says that he likes bitcoin more than he did when he first invested in May 2020. He continues to believe that bitcoin is an excellent hedge against inflation, which is expected to crank-up due to central bank intervention. He has even praised the developers in the space by saying, “Bitcoin has this enormous contingence of really, really smart and sophisticated people who believe in it. It’s like investing with Steve Jobs and Apple or investing in Google early.” He goes on to refer to them as “great intellectual capital”. He’s not wrong. This space is filled with up and coming geniuses creating alternative systems that better represent the average individual.
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