Does This Bitcoin Rally Have More Fuel, or Do We Finally Get a Local Top?

After climbing to $23,800, Bitcoin is currently keeping around $23,000, with $10 billion in ‘real’ volume.

This week, the digital asset finally hit $20,000, and much like $10k was broken at the end of July, $12k in October, and $14k and $16k in November, this breakout also happened with “incredible force.”

Although, it was not the case at first when the volume on Messari showed only about $3 billion. But after the initial break on low volume, the market went into beast mode, and as momentum grew steadily, so did the volume, which went up to $14 billion with not much seen in the way of pullbacks.

“A 29% gain over the space of a week may seem a bit frightening to some. As many will recall from 2017, 29% in a week was kind of a signifier that the market was overheating. Not today, though. In our opinion, things are just getting started,” wrote analyst Mati Greenspan, in his daily newsletter Quantum Economics.

Moving onto Exchanges

The ongoing rally is clearly spot driven as even after the monstrous pump, the futures market's funding rate is really low.

At the same time, Bitcoin's supply is slowly coming back since its big move off exchanges last week, unlike Ethereum’s supply being held on exchanges, which have stayed low during this market-wide crypto rally.

“Often, this can be indicative of altcoin being foreshadowed to make a run of their own. But understand that this could be a riskier play if BTC ends up faltering and taking the crypto markets down with it,” noted crypto data provider Santiment.

Join the Party

For now, Bitcoin’s 113% uptrend in 4Q20 has been pulling people out of the woods. The day BTC broke into a new high, rapper and Three 6 Mafia co-founder Juicy J took to Twitter to ask his 2.7 million followers about investing in the digital asset.

Amidst the crypto boom, crypto futures exchange CoinFLEX also set up a market for unsecured lending. Firms can borrow US dollars and Bitcoin for short-term trading with note tokens expected to offer an 8% to 10% yield, and lenders will also be compensated with 30% of borrowers' trading fees.

Even Dave Portnoy, who bought the top and sold the bottom, has some Bitcoin feels as he notes Bitcoiners are enjoying the massive uptrend.

However, according to many, this might not be the local top yet. According to analyst PlanB, Bitcoin actually has some catching up to do with the S&P 500 as “since Covid Stimulus / QE. S&P implied BTC price is $60K,” he said.

Yesterday, the equity market hit a new high yet again at 3,722, but SPX’s YTD gains are a mere 15.20% and monthly gains just 2.78% compared to Bitcoin’s 17% jump only in December.

Now that bitcoin has broken past $20,000, a new high would be made every day.

More Gains Ahead

With the break of $23,000 for the first time, the world’s largest cryptocurrency is up 220% this year. But we might not be near the top of this short-term rally yet as analysts predict more gains as this momentum continues to build up.

“Should demand continue to pick up from these levels and supply continue to constrain, there is a distinct possibility that we may see some days of 250% gains, or even more,” said Greenspan.

As we reported, Scott Minerd, the chief investment officer at Guggenheim Investments, said Bitcoin’s scarcity and Federal Reserve's rampant money printing could see BTC priced at about $400k.

“There will be a search for alternative currencies due to constant fiat money debasement,” Deutsche Bank analysts wrote in a note. “It does feel that bitcoin will continue to be in high demand.”

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