Bitcoin demand is sinking into a “bear market” year-round, but this increase in the metric will most likely spark a new bull run.
Prominent economic analyst Lyn Alden made the above point in a Twitter debate this week, betting on a massive spike in demand fueling BTC price action.
Monitor supply and demand for BTC price signals
In response to a survey by stock-to-flow modeler PlanB, Alden said a demand shift is more likely to lead to a BTC price explosion than many other events favored by bulls.
These events could include the United States’ approval of a spot-based Bitcoin exchange-traded fund (ETF), a country following in El Salvador’s footsteps in accepting Bitcoin as its legal currency, advances in the Lightning Network, and the wire reaction chain of the recent Taproot upgrade on bitcoin.
Bitcoin poll on Twitter | Source: PlanB
Instead, Alden agrees with Blockstream CEO Adam Back that there will be significant changes due to the positive feedback loop of supply and demand.
Back designation The process is like “squeezing supply as more and more coins go to cold storage, keep buying, and then the price reflexively goes up.”
“Reflex” refers to the mutually beneficial relationship between fundamentals and market expectations when an asset starts to move. This triggers ever stronger performance.
However, when analyzing the state of supply and demand, Alden claims that 2021 has changed little from the status quo since Q1.
“BTC demand has been in a bear market since the first quarter of 2021, back when ARKK peaked. However, supply has been unusually tight this cycle, causing prices to rise to surprising levels and even slightly new highs since.”
Bitcoin Supply Active 6-12 Months | Source: Lyn Alden
As reported, Alden isn’t the only market commentator looking for factors to “put more fuel on bitcoin’s unburned fire” this year.
Even in the short-term, a slight increase in demand could change the trend as FX reserves dwindle and long-term holders control a portion of the total BTC supply, which is currently near all-time highs.
According to an analyst this week, there could even be a move similar to that seen in October 2020 – the springboard for BTC to surpass the previous all-time high set in 2017.
In response to Alden, famed analyst and trader William Clemente “strongly agrees” with the above view.
“The supply side is looking good, holding behavior is also strong. The qualitative view on a Bitcoin float is very favorable for the bulls, the current problem is weak demand, possibly due to the uncertainty surrounding monetary policy.”
Analyst who predicted Bitcoin’s 2018 bottom says bullish reversal pattern is forming
Popular analyst Smart Contracter is bullish on Bitcoin even though the price of the leading cryptocurrency remains bearish.
Contracter said that Bitcoin is forming a bullish reversal pattern commonly known as the SFP (Swing Failure Pattern).
The SFP pattern occurs when the price fails to make a new low in a downtrend or a new high in an uptrend, signaling a trend reversal.
The trader also said that the Bitcoin Fear & Greed Index was in the extreme fear zone for several days. This is a sentiment indicator ranging from 0 to 100. Scores from 0 to 24 indicate extreme anxiety, while 25 to 49 indicate anxiety. A reading between 51 and 74 indicates a greedy market, while a reading above 75 indicates extreme greed. The last time the index was above 24 was on January 3rd.
According to the trader, Bitcoin ending Jan. 18 without falling below $41,000 is a sign a bottom has been found.
“A good bullish SFP is forming above Bitcoin 0.618 structural/Fib support, also we are in extreme fear zone for almost 3 weeks straight.
I think if the daily candle closes above $41,000 in an hour on Jan 18, 2021 a bottom has been found.”
The source: Smart Contractor
Bitcoin is trading at $41,901 at the time of writing, with the bottom hit on Jan. 18 at $41,250.
In mid-2018, when Bitcoin was trading above $5,000, was a smart contracter suspect exactly that the top cryptocurrency will be around $3,200.
His prediction came true in December of this year when BTC fell as low as $3,156 ahead of a rally.
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