One of the reasons for Bitcoin’s price volatility is mixed opinions about the use case. Some experts consider BTC to be “digital gold,” a really scarce and perfect store of value (SoV). Others rate it as a technology project or an appropriately networked type of software.
El Salvador’s acceptance of Bitcoin as legal tender will likely be evidence of the Medium of Exchange (MoE) functionality provided by the Lightning Network. This Layer 2 scaling solution enables instant transfers and is extremely affordable, although it requires frequent on-chain transactions to enter or exit the parallel network.
As the Bitcoin narrative changes over time, the correlation of BTC with the traditional asset also changes. For example, there were times when BTC maintained a strong correlation with gold.
Bitcoin vs. Gold in 2020 | Source: TradingView
The March 2020 crash devastated almost every asset class, but the recovery pattern between BTC and gold over the next six or seven months is practically the same. Oddly enough, there was a reverse move in 2021 that showed a negative correlation between the two assets.
Is Bitcoin a Copy of Tech Securities?
Bitcoin, on the other hand, began to move like the Hong Kong stock market, as measured by the Hang Seng Index (HSI). These include top names like Tencent, Alibaba and Meituan, Asia’s multi-billion dollar tech companies.
Bitcoin and Hang Seng Index (stocks) | Source: TradingView
Accordingly, investors switched from tracking the price of gold to technology stocks, questioning whether Bitcoin could withstand the falling volatility of Hang Seng over the past 90 days. Is it reasonable that they split up now? If so, will Bitcoin continue to act as a safe haven amid the general correction?
On September 14, China’s second largest real estate developer, Evergrande Group, announced a sharp drop in sales, forcing the company to postpone payments on its debt. The company has more than $ 300 billion in debt, which analysts say could seriously affect the broader market.
In August, China’s retail sales disappointed 2.5% yoy, while investors expected 7% growth. Obviously, growth and the economy have been hit hard in 2020 due to the government’s response to the Covid-19 epidemic.
At the same time, it must be taken into account that the most influential central banks have cut interest rates to almost zero or even negative since the first quarter of 2020. Therefore, if the economy does not gain momentum despite several trillion dollars of stimulus packages, then nothing will be done to prevent the general stock market correction and potential losses across the board.
The problem is that Bitcoin has existed for almost 12 years but has never faced an economic crisis as severe as it is now, which threatens the global debt market of more than $ 250 trillion. Therefore, any analysis or estimate cannot provide a reliable assessment.
Bitcoin could be less affected by the market crisis
However, cryptocurrencies have advantages over traditional markets like commercial real estate, stocks, and bonds. Lenders will foreclose these assets if the client defaults and that puts additional pressure on as the bank or institution has no interest in holding them.
On the other hand, Bitcoin and cryptocurrencies in general cannot be used as collateral.
In terms of the liquidation of billions of dollars worth of Bitcoin futures in the derivatives markets, these are just aggregators. Without a doubt, these events will have an impact on the price, but so far BTC is on the futures exchange. It only moves from the balance of the long account (buyer) to the short account (seller).
Until Bitcoin is fully integrated into the financial markets and accepted as collateral, deposits, the medium-term systemic risk for cryptocurrencies will be lower than in traditional markets.
Bitcoin can hit $ 250,000 to $ 350,000 this year
Bitcoin has the potential to push the price down to $ 250,000-350,000 by the end of 2021, a long-forming fractal suggests.
By Bit Harington Analyst recognize First, this bullish setup comes from Bitcoin’s galloping rallies after each halving. Analysts consider the halving to be a bullish event as it reduces the supply of newly mined BTC.
Harington pointed out that after the first two halving events in 2012 and 2016, Bitcoin price rose more than 600% as measured by the resistance / support (R / S) line.
Bitcoin price development after the first 2 halving events | Source: BuyBitcoinWorldWide, PlanB and Bit Harington
This line represents a barrier during an uptrend. Traders tested it several times looking for breakouts before successfully breaking through and making new record highs. As prices began to correct, they eventually bottomed near that line.
In the 2020-2021 period, Bitcoin will show a similar upward trend from under $ 4,000 to over $ 60,000. Once again, Harington marks $ 60,000 as a limit to the R / S line from a clear bullish breakout.
By the way: From this perspective there is a “Bitcoin Double Top” after every halving. It wasn’t really obvious after halving 2 (like the obvious double top after halving 1), but you can still see that double top in various indicators. Weekly RSI for example:https://t.co/lopvWPqd3v
– Bit Harington (@bitharington) September 19, 2021
“From this perspective, there is a“ Bitcoin double top ”after every halving. It’s not really obvious after halving 2 (like the obvious double top after halving 1), but you can still see that double top in various indicators. The weekly RSI is an example. “
Analyst suggests Bitcoin needs to break above it to hit new record prices.
The analyst Michaël van de Poppe. agrees with Harington’s fractal theory speak added that it will put bitcoin price in the $ 250,000-350,000 range.
“That makes a lot of sense and fits my vision. Like 2017. A strong breakout will come to bring the price up to ~ 250-350k $. ”
However, he noted that a large bullish range could also lead to a brutal correction that could push BTC back to $ 65,000, right near Harington’s S / R at $ 60,000.
Do the basics match?
Bitcoin soared after falling below $ 4,000 in March 2020, largely due to the global central bank’s easing of monetary policy to contain the economic impact of the Covid-19 pandemic. The top cryptocurrency ended the year at around $ 30,000 as private and institutional investors kept an eye on their safe-haven history amid a weakening US dollar and fears of inflation.
In 2021, Bitcoin price hit around $ 65,000 so far before correcting below $ 50,000. At its annual low (YTD), the pair is trading at $ 29,301. This is due to the sudden ban on all crypto activities in China (including mining) and Elon Musk’s cautionary tweets about Bitcoin’s explosive carbon footprint.
Bitcoin price history throughout history | Source: TradingView
The leading cryptocurrency kept the price above $ 30,000 as reserves on the exchanges plummeted.
Blockchain data analytics service CryptoQuant reported that Bitcoin balances on exchanges fell to around 2.37 million BTC last week, the lowest level in more than a year.
Reserve bitcoins on all exchanges | Source: CryptoQuant
Reduced bitcoin reserves represent a merchant’s intention to use HODL instead of switching to altcoins and fiat currencies.
This step also coincided with a V-shaped hashrate recovery.
The processing power of the Bitcoin network dropped from 180.66 million TH / s in late May to 84.79 million terahashes per second (TH / s) in early July. This decline came as many miners responded to China’s actions by closing their plants or moving abroad.
Bitcoin hashrate an average of 7 days in recent history | Source: Blockchain.com
But the network recovered more than half of the lost hashrate, hitting 136.92 million TH / s on Sept. 18, suggesting that China’s direct ban has no lasting impact on the bitcoin mining sector.
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According to AZCoin News