Bitcoin’s network fundamentals are as bullish as ever, but $12,000 may spark a retest of lower price levels, an analyst warns.
Bitcoin (BTC) starts a new week at the upper end of its new price range near $12,000 — will the market finally crack it this week?
Cointelegraph takes a look at five things to consider when working out where Bitcoin is headed in the coming days.
S&P 500 nears all-time highs… again
Unlike previous weeks, macro markets and their impact on Bitcoin are back in the spotlight on Monday.
China leads the way, with its stocks rallying to near their highest levels in two years on news that the People’s Bank of China, or PBoC, is planning to ease monetary policy.
The Shanghai Composite Index rose 2.3% on the day, with year-to-date gains sitting at 13% despite the coronavirus turmoil.
Elsewhere, the S&P 500 is already up over 50% versus its March crash lows, with Goldman Sachs analysts revising their end-of-year forecast upwards. The target is now 3,600 points, not 3,000 — a new record high.
Even at publishing time, the index was just 14 points away from the all-time highs it had seen in February before coronavirus hit.
Bitcoin Vs. S&P 500 1-year chart. Source: Skew
“As the last few months have demonstrated, equity prices depend on not just the expected future stream of earnings but the rate at which those earnings are discounted to present value,” Bloomberg quoted Goldman’s David Kostin as writing in a note Friday.
“Looking forward, a falling equity risk premium will outweigh a rise in bond yields, and combined with our above-consensus EPS forecast, will lift the S&P 500 Index to 3,600 by year-end.”
Stocks previously exerted significant influence on Bitcoin, with its S&P 500 correlation already at 95%. As Cointelegraph reported, despite gold taking over in recent weeks, analysts still believe that a dramatic change in stocks would be reflected in Bitcoin as well given the recent correlation all-time highs.
Bitcoin gold correlation. Source: Skew
Bitcoin’s correlation to gold has dropped since the latter lost its $2,000 support level — from 68% to 48% in August, data shows.
Bitcoin vs. gold 1-year chart. Source: Skew
Analyst: $12,000 may send Bitcoin tumbling
Within Bitcoin, market sentiment is facing a hurdle of its own.
$12,000, a level that has seen several retests over the past two weeks but failed to become support, continues to cause traders problems. Recent price action has underscored the fact that $12,000 does not have the appeal to crack as resistance.
“We are still in an uptrend so I should lean on the side of bullish,” said Cointelegraph Markets analyst filbfilb on Aug. 13 in his Telegram channel. He also considers altcoins moving higher as BTC price stays sideways a bullish sign particularly after “price action showed a big bounce out of demand,” he explained. “Lots of wicks.”
Over the weekend, meanwhile, fellow analyst Michaël van de Poppe suggested that the repulsion of $12,000 was strong enough to spark a more pronounced retracement for BTC/USD. A bounce off support at $10,500 was “very likely,” he argued before strength appeared to climb higher and finally flip $12,000 to support.
“Given the significance of this level, I’m starting to think this is becoming a very likely scenario,” Van de Poppe told Twitter followers.
“However, a clear break and flip of $12K are continuations towards $13K and possibly $15-17K area.”
BTC/USD price chart showing possible $10,500 retrace and reversal. Source: Michaël van de Poppe/ Twitter
Bitcoin has returned to trading within a corridor in August after taking out $10,500 and $11,000 resistance in abrupt moves, which surprised market participants with their speed and durability.
Above $12,000, once swept aside, little stands in the way for BTC/USD in terms of resistance until the area around its $20,000 all-time highs from 2017.
Hash rate all-time high precedes difficulty record
Beyond price features, Bitcoin is looking stronger than ever under the hood.
On Monday, Bitcoin’s network hash rate was sitting at all-time highs of 129 exahashes per second (EH/s).
Hash rate refers to the overall computing power that miners have dedicated to validating the blockchain and processing transactions.
The metric is an estimate rather than a hard-and-fast measurement, with the all-time highs concerning the seven-day average hash rate.
Miner behavior changes and impacts the estimate, and hash rate therefore fluctuates. Last week, additional concerns surfaced after one mining pool suddenly sent 800 BTC to exchange Binance — potentially in advance of a sale.
Nonetheless, the latest numbers serve to show that miner sentiment remains strong. Network difficulty, arguably the most important signal for determining Bitcoin’s immediate health, is also set to increase at its next adjustment in six days’ time. That will also deliver a new all-time high.
As Cointelegraph has reported, a popular theory suggests that sustained strength in network fundamentals subsequently triggers an advance in price.
Bitcoin 7-day average hash rate. Source: Blockchain
“Extreme greed” may trigger correction
One factor — or rather a basket of them — is triggering a warning this week.
The Crypto Fear & Greed Index, which uses multiple sources to calculate an impression of investor sentiment, continues to sound the alarm over excessive “greed” among hodlers.
On Monday, the Index sat at 84/100, just three points off its all-time high of 87 from June 2019.
Derived from the Fear & Greed Index for traditional markets, the metric aims to suggest when volatility up or down may ensue.
Specifically, the higher zone in which the Index currently resides means a significant change that the market is “due for a correction.”
In late March, by contrast, the Index hit lows of 8/100 as investors were “too worried” over Bitcoin’s strength after the cross-asset crash two weeks previously.
Crypto Fear & Greed Index as of Aug. 17, 2020. Source: Alternative.me
Quant analyst targets $14,000 monthly close
As is often the case, zooming out just a little on Bitcoin delivers a much stronger bull case for the buyer.
In charge of the perspective this week is quant analyst PlanB, whose Stock-to-Flow price forecasting model has returned to the limelight.
Specifically, in exactly one year’s time, the model demands a BTC/USD price of $100,000. In the meantime, PlanB says, plotting Bitcoin’s monthly closing value since May’s halving delivers a next price target of $14,000 — the aim is to beat its highest-ever monthly close from December 2017.
Bitcoin S2F Cross-Asset model chart. Source: PlanB/ Twitter
“3rd red dot (currently $11850) above 2nd red dot (#bitcoin July close $11356) and above 1st red dot (June close $9132) .. next target: Dec 2017 ATH close $14K,” he commented uploading the latest version of the model’s price chart.
