Bitcoin’s blue moon in full bloom
Bitcoin has breached a level in which some analysts including myself would act as resistance and a likely point to enter a correction. This price level at approximately $16,300 in the CME’s futures contract was taken out in trading Monday and that opened the door for more parabolic movement to the upside gaining another $800 in today’s trading. As of 3:30 PM, EST is currently at $17,715 for the CME’s most active futures contract (BTC X20). This is almost a 5% increase today alone, add to that yesterday’s move and Bitcoin futures gained approximately 9% in value this week, and its only Tuesday.
This transformation from a stairstep rally to a parabolic one began on Monday, October 19th when pricing broke back above $11,600 and was cemented two days later when PayPal announced its decision to make Bitcoin transferable through the world’s largest payment solution conglomerate. This news echoed the reality of Bitcoin’s rapid increase in acceptance and adoption as institutions have been jumping aboard the Bitcoin bandwagon in 2020.
This development with PayPal was extremely bullish news for the world’s first and largest digital asset’s mid to longer-term outlook. For the shorter term, I believe it has opened up the likelihood of another bubble. The detriment I see is that once again, (and it seems to happen every year) Bitcoin is overheating in a world with global warming and will likely experience growing pains. Before PayPal’s announcement on Oct. 21st, Bitcoin was experiencing a healthy and sustainable rally. Now it seems likely will see another giant spike in volatility as Bitcoin tries to rocket to the moon but is unable to escape Earth’s gravity and crashes back to the ground.
The good thing for bulls is “rock bottom” seems to gets higher each time Bitcoin hits it. It rose from $3,500 in 2019 to $4,500 in 2020, this cycle I believe will continue to repeat itself. As such we could see this rally continue up until the end of the year and fall from the sky hitting a low somewhere above $5,500 in 2021. For traders who took the riskier call to short BTC at $16,000 should place protective stops at $18,020. For those taking the safer option to remain flat continue to stay sidelined for now.