Bitcoin Scarcity in Effect: ‘Extreme Greed’ in Market as BTC Breaks the ‘Double Barrier’ With Gusto
Bitcoin is in a rally mode.
In just less than five days, the digital asset has surged 21% to as high as $15,970 on Bitstamp, a level last seen in the first week of January. The ‘real’ trading volume has surpassed $6 billion. Currently sitting at a price of $15,550 (+4.95%) with a market cap of $5.69 billion.
The latest bout of volatility also has altcoins rising this time. Overall, the total market cap has added $60 billion in the last three days.
The declining US dollar, uncertainty from the US election, lockdown across Europe, and the market's very own FOMO is helping drive the prices of digital currencies higher.
Just yesterday, the Bank of England added over $195 billion to its asset purchase program while the Federal Reserve said it would do whatever it can to help the US economy.
“Bitcoin is the big winner from the current macro environment,” said Anthony Pompliano, co-founder of crypto investment firm Morgan Creek Digital Assets. “As we saw coming out of the 2008 liquidity crisis, inflation hedge assets do very well when the Fed steps in with QE.”
In 2020, the market also saw increased interest from institutional investors and corporations. Besides increased adoption from mainstream financial firms, more clarity from global financial regulators is expected to drive prices higher.
“The once dismissed asset is now acknowledged by traditional finance,” said Dave Chapman, a Hong Kong-based executive director at OSL, a crypto brokerage.
— Norgard (@BrianNorgard) November 6, 2020
One of the most exciting things is the fact that Bitcoin has now been above the psychologically important level of $10,000 for more than 100 days.
The last time BTC ran above $10k for this long was at the peak of the bull run in 2017-2018, but even at that time, it was only 63 days.
Bitcoin is actually showing the type of momentum that hasn’t been seen since the last bull cycle, as the technical setup that has been building for a while now has finally broken.
Yesterday, BTC “not only surpassed the double barrier” but did so “with great strength, heavy volume, and bullish sentiment,” noted analyst Mati Greenspan. BTC has even broken the key psychological level of $14k, which was strong resistance, “clearing an easy path to the all-time high.”
Bitcoin is trading election results. It is now a macro asset. It responds to macro events. Trends ensuing from elections have long staying power. Best to ignore resistance levels and be patient. If it corrects, too bad, very likely it will be only temporary. Opinion not advice.
— Alex (@classicmacro) November 6, 2020
At the current price, a whopping 98% of all BTC UTXOs are in profit with sentiments reaching “extreme greed,” a big change from last week’s “fear.”
The bulls are strong, and adding to this bullishness is that bitcoin is getting scooped off from the market faster than it can be mined. Last week, Grayscale bought 16,000 BTC while miners produced only 6,300. Demand for BTC on Square’s cash app also doubled in Q3 from the previous quarter.
Not to mention the BTC deposit at major exchanges has fallen under 2.4 million BTC for the first time since August 2018. This trend has been continuing since the March sell-off, during which these deposits fell by 560,000 BTC (19%).
So, with not much BTC left for sale, scarcity is in full effect.
There is virtually no BTC left for sale pic.twitter.com/OS8E2yGq4m
— girevik (@girevik_) November 5, 2020
According to Fundstrat Global Advisors LLC technical strategist Rob Sluymer, after taking out the June 2019 highs at $13,900, the next level of resistance is around $20,000 – the all-time high (ATH).
While many remain skeptical such as Empire Financial Research’s Whitney Tilson, who regards crypto as “a techno-libertarian pump-and-dump scheme” and recommends investors to avoid them, the crypto market knows it is just the beginning.
“Previous Bitcoin resistance at about $10,000 may transition toward $20,000 in 2021,” said Mike McGlone, commodity strategist at Bloomberg Intelligence. “Certain supply leaves demand as the primary price metric, and most indicators remain positive.”