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Wall Street Isn’t Ready For What’s Next

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Bitcoin price just set a new yearly high after pushing above $12,000 and may be gearing up for an explosive move higher. The first-ever cryptocurrency may be finally entering a new uptrend.

If this is the case, and the asset continues to follow the stock-to-flow model, Wall Street may be left in shock after having to adjust their chart settings to keep up with Bitcoin’s logarithmic growth.

Institutions Begin Looking Toward Bitcoin As A Hedge Against Inflation

Bitcoin is unlike any other financial asset before it. And while it shares several key similarities with gold, the cryptocurrency existing digitally offers extensive benefits above and beyond the shiny precious metal.

It has no physical footprint, and cannot be counterfeited or duplicated. It is easy to store, simple to move and is highly durable. Most importantly, it is controlled by no third-party or government, and only 21 million will BTC will ever exist.

Its limited, commodity-like supply makes it extremely rare compared to fiat money supply, and therefore an ideal store of value and hedge against inflation.

Wall Street is suddenly taking interest in the asset for this very reason, just as gold broke its all-time high and attracted the likes of Warren Buffett. Hedge fund manager Paul Tudor Jones cast the first stone by comparing Bitcoin with gold and claiming it will be the fastest “horse” in the “race against inflation.”

RELATED READING | BITCOIN BLASTS BACK ABOVE $12,000, SETS NEW HIGH FOR 2020

Others have taken notice. Recently, MicroStrategy, a Nasdaq-listed firm disclosed its purchase of 21,000 BTC – nearly a month worth of newly created BTC – to the SEC. Such a large bite taken out of the supply by just one firm demonstrates just how scarce Bitcoin is.

Several models have been created to attempt to predict the asset’s long-term value based on its scarcity alone. Of these models, Plan B’s stock-to-flow (S2F) model is the most popular and suggests that Bitcoin’s price will soon rise exponentially now that the halving has passed.

If Bitcoin price continues to rise and follow along the S2F model prediction, one analyst says that Wall Street will be so shocked, they may need to adjust their price charts.

S2F Model To Cause Wall Street Stock Market Chart Shock

Bitcoin expert Preston Pysh who often shares fundamental insight into the first-ever cryptocurrency, says that Wall Street may not be “ready for what comes next” if BTC continues to follow the S2F model.

The reason being, he says, is that “market participants are accustomed to looking at things in linear terms,” not the log terms that crypto analysts use for long-term BTC analysis.

BTCUSD Linear Versus Log Scale Comparison | Source: TradingView

Bitcoin as a technology has been growing along a logarithmic growth curve, depicting adoption in progress. Therefore, price action in the cryptocurrency is more often than not reflected in log charts, not linear charts like stocks, gold, and other assets.

RELATED READING | BITCOIN’S PRICE IS RISING, BUT DATA SHOWS NO ONE WANTS TO SELL

The above chart shows what BTCUSD looks like in both linear and log scale. Bitcoin’s entire early history is barely a blip on the linear chart. If the cryptocurrency continues along its path laid out from the SF2 model, the asset could some day reach prices of $100,000, to $400,000, and up.

bitcoin btcusd log linear

BTCUSD Linear Versus Log Scale Comparison | Source: TradingView

If you think that linear scale made the asset’s prior peaks at $1000 look tiny, wait until you see below what it does to even $20,000 when considering realistic upside targets for BTCUSD.

Even at just a glance, it’s clear to see why Wall Street might be shocked to see an asset that charges up a linear price chart so quickly. A simple click or two should do the trick and get their analysis sorted, however, not before initial shock sets in.

Featured image from Unsplash.





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Bitcoin

3 reasons why Bitcoin price has not been able to rally back above $40K

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The ongoing story for the past couple of months in the cryptocurrency market has been confusion on whether Bitcoin (BTC) is destined for another leg down or is finally ready to break out toward new highs.

Bitcoin’s price history and data from previous corrections suggest that the current struggles for the top cryptocurrency could persist for a little bit longer due to the strengthening dollar, the possibility of decreasing economic stimulus and a slew of technical factors connected to Bitcoin’s price action.

A strong dollar threatens Bitcoin’s recovery

According to data from Delphi Digital, one of the biggest factors placing strain on risk assets around the globe is the strengthening U.S. dollar which appears to be attempting a trend reversal after falling below 90 in late May.

DXY 1-day chart. Source: TradingView

Rising dollar strength put a halt to the year-long uptrend in the 10-year US Treasury yield which is also a reflection that the economic expansions seen in the first half of 2021 are beginning to lose steam and there is a threat that a new wave of Covid-19 infections threatening the global economic recovery.

Fractals and the Death Cross suggest the correction is not over yet

The short-term outlook for Bitcoin remains bearish as previous instances of the “Death Cross,” which appeared on BTC’s chart in late June, have been followed by a corrective period that can last for nearly a year.

Bearish crossover of the 50 day and 200-day MA. Source: Delphi Digital

According to the analysts at Delphi Digital, the 12-month moving average is being tested as support, and a dip below this level would signal further downside for BTC price.

Bitcoin price testing the12-month moving average. Source: Delphi Digital

The 12-month moving average has been a key support level for Bitcoin historically, so how the price performs near this level could dictate whether the current uptrend remains intact.

Related: El Salvadorians take to the streets to protest Bitcoin law

Overall, caution is warranted for traders because low volumes have historically led to higher volatility when fewer open bids can lead to rapid price fluctuations.

As explained by Kevin Kelly, a certified financial analyst at Delphi Digital, “the short-term outlook turns quite a bit more bearish if and when we break those key levels” near $30,000.

Kelly said:

“I don’t necessarily think that we will see as nearly as significant of a drawdown as we did in say, post-December 2017, early 2018, and into the end of that year. But I do think, just given the structure of the market, that we could potentially be in for a bit more short-term volatility and potentially some more headwinds here, in the near term.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.