The price of Bitcoin (BTC) has risen between $ 8,600 and $ 10,000 in the past two months. BTC has shown little volatility since May after a critical rejection at $ 10,440. However, Five key fundamental factors still point to a sustained upward trend for 2021.
Bitcoin’s 10-day volatility fell to its lowest level of the year on June 24, according to Skew data. This can indicate this Traders are cautious because BTC is at a crucial price. BTC’s performance over the next few weeks could point to price developments throughout the year.
Overall, cryptocurrency traders’ sentiment remains positive regarding Bitcoin’s medium-term outlook. Short term, Analysts see weakness in BTC and other major cryptocurrencies due to external variables such as the COVID-19 pandemic.
In the long term, strong macroeconomic factors indicate that BTC is on the way to a strong recovery. The most important fact that supports the predictions of a positive trend is the increase in “HODLING” activity among investors.
The strong accumulation of bitcoin
According to Rafael Schultze-Kraft, Technical Director of Glassnode, various data from HODLing show an increase in investor confidence. For starters, the supply of Bitcoin, which has not moved in for over a year, has reached an all-time high and is included 61%. This shows the lack of appetite to sell BTC at the current price level. Shultze force said::
“First, the obvious: 61% (!) Of the Bitcoin offering that has not moved in over a year is a record high. In addition, 44% has not moved (approaching ATH) in more than two years, and almost 30% have not moved in over 3 years.
Shultze-Kraft further emphasized this A metric called “HODLer Net Position Change” shows that investors accumulated a lot of Bitcoin in 2020. The data show the reluctance of many private investors to sell BTC. highlight as: “It’s been 16 days since the beginning of this year when the metric for changing BTC Hodler’s net position was negative“”
If the change in BTC Hodler’s net position is still positive, This means that investors do not convert funds from their personal purses into exchanges to sell. In March 2020, the price of Bitcoin fell below USD 3,600 on several large futures exchanges.
Alistair Milne, Chief Investment Officer of the Altana Digital Currency Fund, suggested that there could not be many factors that could do so in the future if this decline could not shake investor confidence. Milne explained: “Similar HODL levels were last seen during a three-month consolidation at around $ 400 before a two-year bull run was started […] I expect this cycle to peak at around 70%.“”
Historically, bullish runs in the cryptocurrency market have coincided with an increase in HODL activity. At the beginning of 2018, for example, the “HODL Wave” from Bitcoin began to recover. From March to July this year, BTC rose from about $ 4,000 to $ 14,000.
As such, Philip Swift, creator of the lookintobitcoin.com cryptocurrency market data platform, explained: “At the beginning of previous Bitcoin bull runs, such a high HODLing level was present“”
Institutional investors are constantly investing in Bitcoin
As of March 2020, the assets under management by the Grayscale Bitcoin Trust increased from $ 1,577 million to $ 3,541 million. The sharp rise in total assets under management (AUM) indicates a similarly accelerated demand from institutional investors.
In particular, the United States’ institutions have a narrow selection of investment instruments with which to engage in Bitcoin. Without ETF, eThe grayscale bitcoin trust should remain the benchmark instrument for institutional investors.
The grayscale Bitcoin trust’s AUM hits a record high, while Bitcoin’s price has dropped more than 50% from its record high. This is a positive measure. This shows that the institutes have confidence in the long-term trend of BTC, more than three years ago.
However, according to Messari researcher Ryan Watkins, reports of Grayscale’s purchase of most of the recently mined Bitcoin may be inflated. Watkins explained Grayscale has bought only 31% of newly mined Bitcoin since halving on May 11:
“Grayscale is buying much less Bitcoin than many think. Considering in-kind purchases, Grayscale bought only 31% of all new bitcoins that have been mined since halving, far less than the 150% that many have reported. It’s just one of the many Misunderstandings about grayscale trusts. “
Although analysts point out that it is important to consider the numbers that could reinforce the actual numbers of confidence,The sum of 31% of Bitcoin mined is still a considerably high figure.
Optimistic technical structure
Nunya Bizniz, a cryptocurrency trader, said Bitcoin’s six-month chart should see a green 1 or G1 candle under the Tom Demark sequential indicator system. Every time a G1 candle appeared, Bitcoin experienced a longer boom for several years. The dealer too said: “A green 1 candle signals the beginning of an upward trend. The six-month candle is closed today as G1. A bullish run ahead?“”
In addition to various favorable technical structures and macro indicators, futures data also indicate that the market is not overbought. Usually When the Bitcoin price gets a big correction, it is triggered by the surrender of overfunded buyers. On futures exchanges like BitMEX, Buyers often borrow up to 100x leverage to sign a long contract in Bitcoin. If BTC falls, it can lead to a cascade of liquidations and a sharp drop in prices.
A technical analyst named “Byzantine General” said BitMEX’s perpetual swap contract finance rate and open interest rates show that BTC is not yet overbought. she they said: “At the height of the last rally in February, there were many very clear signs that the market was overfunded and overbought. But we don’t have that at the moment.“”
Possibly due to Bitcoin’s optimistic medium-term trend, the number of wealthy investors transferring funds from exchanges to their personal wallets has increased in recent months.
The number of whales on the Bitcoin market has exceeded 1,800, according to Glassnode data. But, As the amount of BTC held by whales has not increased, this suggests that the BTC market was less focused on new entrants.
The increased hash rate covers all macro factors
When the block reward was halved on May 11thAnalysts expected the Bitcoin blockchain hash rate to drop sharplySince the event caused the amount of mined BTC to be halved, most miners’ incomes fell by up to 50% overnight.
However, data from Blockchain.com show that Bitcoin’s hashrate has risen again near the pre-event level. L.The mining industry remains healthy despite halving, which could further lighten the mood around Bitcoin overall.
Large mining centers in Sichuan, China, remain largely profitable. The rainy season led to a decrease in electricity tariffs, which reduced the costs of BTC mining. As a result, miners have fewer incentives to sell large quantities of BTC in the short term to cover the costs. Typically, over-levered miners are put under pressure after halving to sell at the same bitcoin mining prices. This time the block reward was halved with relatively little selling pressure.
So, The coincidence of low sales pressure from miners, a favorable long-term technical structure, increased HODLing activity, an increasing number of whales and increasing institutional acceptance increases the likelihood of a new rally for 2021.