Bitcoin price chart shows ‘Elon Musk’ pump was an outlier — So what happens now?

Bitcoin (BTC) has seen a very volatile week, as the price of Bitcoin jumped around from $32,000 to $38,500 and back toward $33,000 in a matter of 24 hours. 

The initial spike to $38,500 happened in minutes after Elon Musk added #Bitcoin to his Twitter profile.

However, no follow-up of that price movement was seen on the charts as Bitcoin dropped substantially in the following hours. Currently, the $34,500 area is a significant resistance zone to break through if the market wants to sustain the bullish momentum.

Failure to break $38,000 causing dropdown

XBT/USD 4-hour chart. Source: TradingView

The levels that are critical to watch are highlighted in the chart above. Simply put, $38,000 must break for the rally to continue. Flipping this level for support opens the door to new all-time highs.

However, the surge couldn’t be sustained yesterday. After the $38,000 level’s failure, the $34,000 level couldn’t provide the heavily needed support for further upward momentum.

Therefore, the “Elon Musk pump” can be considered an outlier, and the general trend continues. This is a downtrend since the peak high at $42,000 that most likely will continue unless Bitcoin’s price can break through $34,500 and flip it into support.

Dollar showing strength is bad news for Bitcoin

U.S. Dollar Currency Index 1-day chart. Source: TradingView

One of the primary arguments for more Bitcoin downside would be the recovering U.S. Dollar Currency Index (DXY). This index shows a potential bottoming formation as a bullish divergence is seen at the significant 90-point level.

After this, the bullish divergence will be confirmed through a higher low, indicating that more upside is likely. 

Remarkably, the previous relief rally on the DXY Index in September caused a 20% correction for Bitcoin. However, since that relief rally, the DXY Index has shown massive weakness, one of the significant variables for the enormous increase of Bitcoin’s price to $42,000.

However, February isn’t the best month for equities. The same can be concluded about Bitcoin, as February 2018 was when Bitcoin crashed to $6,000 after hitting its previous all-time high.

Therefore, a rebounding DXY could add to the bearish sentiment for Bitcoin in February as well.

Bitcoin Dominance Index eyes relief rally

BTC Dominance 1-week chart. Source: TradingView

Historical charts show previous market behavior with many patterns being cyclical. 

When Bitcoin’s dominance topped out in December, massive surges were seen across the altcoin market. However, after such an enormous rally, a healthy correction would not come as a surprise to test previous resistance levels.

Those tests would mean a bounce for Bitcoin dominance in February, which may open the door for a huge run for the entire crypto market from March onwards.

Critical levels to watch for Bitcoin

XBT/USD 3-hour chart. Source: TradingView

The critical levels to watch are easy to see in the chart above. First, Bitcoin’s price has to reclaim the $34,500 level as support to sustain bullish momentum. If that happens, the level at $38,000 will be retested. Most likely, that test will result in a breakout above $38,000 toward the all-time high. 

However, if Bitcoin’s price can’t break through $34,500, further downward momentum is likely, as the chart shows. In that perspective, the critical level to watch is the $30,000 region. If that fails to sustain support (after numerous tests already), I expect a drop toward $25,000 and the 21-Week MA.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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I’d buy the Tesla Cybertruck with Bitcoin

Tim Draper, the billionaire Bitcoin (BTC) investor who also invested early in Tesla, reacted to the company’s CEO and world’s richest man, Elon Musk, adding #Bitcoin to his Twitter bio to join the likes of Twitter CEO Jack Dorsey and Reddit co-founder Alexis Ohanian.

Draper, who holds around 30,000 BTC according to reports, told Musk that he would like to pay for the Tesla cybertruck with BTC while promoting his Bitcoin payment processor portfolio company OpenNode. He said:

“Hi Elon Musk, I would like to buy a Tesla cybertruck. Although I personally would rather keep my own #bitcoin, you can accept #bitcoin through our Draper VC company OpenNode.”

Why now?

On Jan. 29, Bitcoin proceeded to rally by 14% in merely 30 minutes shortly after Elon Musk’s Bitcoin support began circulating on social media. 

Many speculated that Musk could have been the high-net-worth investor behind the massive Bitcoin accumulation on Coinbase in the past week.

In the past several days, the premium on Coinbase skyrocketed to around $200, compared to Binance. This usually indicates significant buying activity from U.S. investors.

However, Musk did not follow up on the bio change, and overnight, the rally reversed. Bitcoin rose from $33,000 to over $38,000, and dropped back down to $33,000.

Draper likely tweeted at Musk due the interest in Bitcoin from Musk and the positive market sentiment around BTC.

In a recent interview with CNBC, Draper said that he is actually buying more Bitcoin. Draper also said that he does not intend to sell BTC in the future, expressing his strong belief in Bitcoin as a “currency of the future.” He said:

“I’m actually just buying more [Bitcoin]… I have no interest in ever selling my #Bitcoin for dollars. Why would I take the currency of the future and sell it for the currency of the past?”

On-chain data shows that Draper isn’t the only one focused on long term gains.  In fact, “HODLing” activity, which indicates the intent of Bitcoin investors to hold BTC for a long time, is at record highs.

Bitcoin 1-year HODL wave. Source: Lookintobitcoin

Will Bitcoin ever be used as a currency?

Bitcoin is increasingly becoming considered as a store of value and an alternative to gold as a safe-haven asset. In recent months, though, the correlation and inverse correlation between Bitcoin, gold and stocks have been decreasing. 

Bitcoin correlation vs. S&P500,VIX, DXY, Gold. Source: Digital Assets Data

In addition to the massive price gains, the fear of inflation and the large injection of liquidity by central banks have stirred massive interest among institutional and high-net-worth investors.

But while accepting BTC is becoming increasingly common, the question remains whether Bitcoin would ever be used as a currency and a medium of exchange like the dollar today.

Ironically, when the price of Bitcoin is in a clear uptrend, investors are less likely to sell or spend their BTC. Draper himself is suggesting that he will probably pay the $40,000 for the Cybertruck with dollars rather than the “currency of the future.”

However, if Bitcoin price stabilizes in the future at a high enough price level and sees lower volatility, then BTC could become more compelling for everyday payments.

Meanwhile, as the network gains more users and must scale, the Bitcoin blockchain network may ultimately become inefficient to use for everyday payments on the first layer. 

At that point, second-layer scaling solutions, like Lightning Network and sidechains like Liquid, for example, may become the blockchain “apps” for processing small payments instantly. Such interoperable platforms will likely have their own tradeoffs with varying degrees of trustlessness, privacy and decentralization.

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Bitcoin price returns to troubled waters hours after Elon Musk’s BTC tweet

When Bitcoin’s (BTC) price dropped 10% to $29,150 on Jan. 27, something unusual happened with the Chicago Mercantile Exchange (CME) BTC futures contracts. 

As the price fell, these CME Bitcoin futures traded at a 1% discount to Coinbase, which signaled a disarrangement between both markets.

Good morning.

Bitcoin spot has almost full retraced the weekly.

CME bitcoin futs are both backwardian and expire Friday. That is all.

— i.am.nomad (@IamNomad) January 27, 2021

Immediately, traders suggested that futures contracts, which were set to expire in 48-hours, were responsible for the price dump. Now, before rushing to quick conclusions, one should note that every short sale needs a buyer (long) of the same size.

Thus, there can not be an open interest imbalance. Moreover, futures contracts can be extended (rolled over) for a future date, as long as its holder has enough margin to cover it.

Instead of assuming that one singular factor impacted Bitcoin’s price, it’s better to analyze the intraday movements of both markets (CME futures and spot exchanges).

The futures premium (or basis) measures the premium of longer-term futures contracts to the current spot (regular markets) levels. Whenever this indicator fades or turns negative, this is an alarming red flag. This situation is also known as backwardation and indicates bearish sentiment.

CME futures premium. Source: TradingView

These fixed-month contracts usually trade at a slight premium, indicating that sellers request more money to withhold settlement longer. On healthy markets, futures should trade at a 5% to 15% annualized premium, otherwise known as contango.

The unalignment between each market could have been caused by long contracts liquidations driven by traders with insufficient margin, thin order books, or an intense price action ahead of the remaining spot markets.

Therefore, this data by itself does not uncover a cause or a consequence. Furthermore, a similar movement took place on Jan. 18.

CME futures premium vs. Coinbase BTC USD. Source: TradingView

Take notice of how the CME BTC premium collapsed to a negative 1% despite no apparent volatility taking place on the BTC spot exchanges. It is safe to say that this event held zero relation to the market’s price action.

By analyzing the Jan. 27 crash on a more granular view, it is possible to determine whether the negative CME premium preceded the market volatility.

CME futures premium vs. Coinbase BTC USD. Source: TradingView

The above data levels show that instead of acting as a leading indicator, the CME Bitcoin futures premium plunged much later in the day. As Bitcoin tested the $31,800 resistance, the sell pressure at CME continued, causing the momentarily price difference.

Multiple reasons could be behind this effect, so comparing the intraday price on multiple exchanges might explain if CME led the downturn.

CME BTC futures vs. Coinbase, Binance Perp, OKEx weekly. Source: TradingView

To summarize, there is no evidence of any price anticipation by the CME Bitcoin futures. These markets are incredibly arbitrated and will typically move in tandem. Moreover, the usual premium might face some momentary discrepancies similar to those that occurred on Jan. 18, regardless of Bitcoin’s volatility at the time.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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GMI Model Estimates Bitcoin Fair Value At $300K By October 2021

Bitcoin price has held on tightly to support at $30,000, and according to Raoul Pal’s Global Macro Investor Report, the leading cryptocurrency by market cap could 10x from there by October 2021.

GMI’s model uses Metcalfe Value to make the prediction, and currently suggests the cryptocurrency is severally undervalued. Could that lofty target be only nine months away? Here’s what past market cycles say about the estimate.

Raoul Pal’s GMI Report Calls For $300K BTC Before The End of 2021

Raoul Pal has decades of global macro investing experience. He’s regularly been outspoke about Bitcoin and its long term value proposition. The GMI founder was particularly vocal about the cryptocurrency prior to the breakout in Q4 2020.

Valuations have only increased from there, and significantly so. However, according to a recent model from a GMI Report focusing on Metcalfe Value, things are only warming up.

Related Reading | Bitcoin Trend Strength Suggests No End In Sight, Second Most Powerful Historically

The chart includes the GMI Model Metcalfe Value and its proximity to Bitcoin price. The “value” has acted as a sort of middle-point for the cryptocurrency’s valuation.

A chart created by Global Macro Investor shows the path to $300K per BTC | Source: GMI Report

Currently, Bitcoin is tracing significantly below its Metcalfe Value, according to the report. Past instances of Bitcoin bull markets have always risen beyond the Metcalfe Value, but simply catching up in this case would take the cryptocurrency to a $300,000 per BTC by October 2021.

Trajectory Matches Target, But Metcalfe’s Value Could Suggest More Is Possible

The project does indeed line up with predictions from other analysts, firms, and more. Even taking the exact trajectory of the last cycle, and super imposing it over the current cycle would indicate a peak of around $325,000 per BTC.

Related Reading | Robinhood Reminder: Not Your Keys, Not Your Bitcoin

However, if the Metcalfe Value truly is accurate, and the cryptocurrency is this accurate, $300,000 as the ceiling is an extremely cautious estimate. Again, past instances of the bull market peaks have always risen beyond  the Metcalfe Value according to the GMI Report chart.

The trajectory from the last cycle matches GMI's estimate | Source: BTCUSD on TradingView.com

Prices around where previous peaks reached beyond the value, would put the price of each Bitcoin somewhere near $1 million apiece.

If that’s the case, buying at any point over the next nine months could be the greatest opportunity of our lifetimes. However, other attempts to assign a fair market value to the crypto asset using Metcalfe’s Law, have much lower estimates.

Featured image from Deposit Photos, Charts from TradingView.com

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Whales And Miners Face Off Against Elon Musk Bitcoin FOMO, Robinhood Retail

Over the last few days, whales and miners have been depositing the largest amount of Bitcoin this year, yet despite all the selling, price is soaring. The reason? Elon Musk has changed his Twitter bio to include the cryptocurrency’s hashtag and it has ignited a flood of FOMO from retail Robinhood traders seeking free markets.

Miners, Whales, And More Can’t Stop Bitcoin Rally

Bitcoin kicked off 2021 as bullish as can be, rising from under $30,000 to above $42,000 in a matter of days. After that high, things turned bearish for the short-term, driven by profit-taking from early investors in the asset, miners, and even some whales.

Related Reading | Bitcoin Trend Strength Suggests No End In Sight, Second Most Powerful Historically

Institutional investors have been buying up what the market could offer, but price action began to sink as sentiment turned.

Whales are selling BTC at the highest level in eight months | Source: CryptoQuant

Whether the turning sentiment is behind the trend, or if it is simply more profit booking, whales have moved more BTC to exchanges recently than they have the last eight months. At the same time, miner deposits have reached the highest point of the year.

Miners have also moved the most BTC all year | Source: CryptoQuant

But despite all these bearish signals, the price of cryptocurrencies keep on rising today, and are up 20% or more in some cases over the last week.

Elon Musk Boosts Retail FOMO, Robinhood Floodgates Open

Miners and early crypto whales have met their match in an army of retail traders exiting Robinhood searching for greener pastures, combined with a “tidal wave” of institutional capital, and now, those who follow or support Tesla and Elon Musk.

Elon Musk added the #Bitcoin hashtag and corresponding emoji to his bio | Source: Twitter

The recent Robinhood kerfuffle has had the likes of Musk outraged, and speaking out in support of free markets. Assets like Bitcoin cannot be shut down like stocks can. An exchange can of course still halt trading if the situation calls for it, but no one can outright stop the Bitcoin market from existing.

Related Reading | Robinhood Reminder: Not Your Keys, Not Your Bitcoin

Even if exchanges were taken down, the peer-to-peer asset could still transact and could find a way. Tech leaders like Musk have come to appreciate cryptocurrency technology for these reason, along with the fact they remain out of reach from state actors.

Bitcoin price skyrocketed after investors saw the addition to Musk's bio | Source: BTCUSD on TradingView.com

Along with Musk’s nod of approval over Bitcoin, the Robinhood situation itself has prompted an exodus from the platform and major boost to Coinbase – which offers the ability to move assets off of the platform, unlike Robinhood.

Featured image from Deposit Photos, Charts from TradingView.com

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