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3 reasons this rally could hit new all-time highs

November 5, 2020

From November to December 2017, the price of Bitcoin (BTC) saw a parabolic upward trend to a new all-time high of $ 20,000.

There are three reasons why Bitcoin could show a similar trend in the coming months. First, The cycle after halving takes effect. Secondly, The Relative Strength Index (RSI) shows room for further recovery. In third place The rally did not overheatat least in the derivatives market.

Long-term RSI shows that Bitcoin is not overbought

Plan B, the creator of the Stock to Flow (S2F) indicator, shared a long-term RSI chart from Bitcoin. The indicator that measures whether an asset is overbought or oversold, shows that BTC is still at a neutral level.

Bitcoin Relative Strength Index (RSI). Source: PlanB
3 reasons this rally could hit new all-time highs
3 reasons this rally could hit new all-time highs

Although Bitcoin rebounded from $ 10,500 to $ 14,600 in one month, The RSI shows that there is room for further benefits.

For example, Bitcoin’s RSI exceeded 95 points in December 2017. When the RSI exceeds 75 points, Traders are starting to consider that the asset is overbought. Currently, BTC’s long-term RSI shows it is below 70 points.

The cycle after the halving materializes as in the past

In 2017, one of the top reports about the Bitcoin boom was the halving in 2016. A halving of the block reward, which happens roughly every four years, causes the rate at which miners produce BTC to be halved.

Slower bitcoin production leads to a general decline in BTC inflows on exchanges, causing supply to decline.

The last one occurred in May 2020and in 2017, Bitcoin started recovering months after the halving was activated. Bitcoin’s ongoing rally is in line with previous macro rallies.

It’s not a heated rally, there are fewer sellers on the spot market

In the past five days The Bitcoin funding rate remains negative on major exchangesespecially with Binance Futures. This shows that the majority of the futures market has cut BTC.

A rally is considered overheated if the futures funding rate rises above the average rate of 0.01%.. In the past few weeks, the BTC funding rate has been between -0.01% and 0.01%. This shows a fairly neutral derivatives market.

In addition to the less crowded futures market, there are also fewer sellers on the spot market. according to TensorChartsThere are some sell orders at $ 15,000 but no major sellers at and above this level.

BTC sell orders at Binance. Source: TensorCharts.com

Since there is little resistance between $ 15,000 and $ 20,000, This increases the likelihood of hitting a new record in the months ahead.

If you follow the same halving cycle from 2017, then Bitcoin would theoretically peak in the second quarter of 2021. If that’s the case, Chances are BTC could well exceed $ 20,000.

The ongoing rally is an immensely strong dynamic for Bitcoin as the Miners have started selling BTC. This shows that the market is picking up the miners’ selling pressure.