Consolidating Bitcoin: USD/BTC (BTC=X) set to revisit 2019’s upper bound in 2020
The fact that a store-of-value asset with fixed supply and increasing adoption is more likely to appreciate in price will keep Bitcoin supported in 2020, in our view, while the primary trends of 2019 that favored the first-born cryptocurrency vs. rivals should persist. We expect movements in gold — which appears as a nascent bull market — to remain a proxy for Bitcoin. The broader crypto market is at risk of more mean reversion of the parabolic 2017 rally and depends on advancing Bitcoin for buoyancy. Our takeaway is straightforward: Bitcoin is winning the adoption race, notably as a store-of-value in an environment that favors independent quasi-currencies.
Volatility should continue to decline, as we expect $6,000 to mark this year’s key support and $10,000 to hold resistance.
Consolidating Bitcoin set to revisit 2019’s upper bound in 2020
Time-correcting Bitcoin is more likely to migrate toward the top of its 2019 range in 2020, in our view. Last year’s principal trends — the first-born crypto gaining adoption and most rivals falling behind — is set to continue. In 2020, Bitcoin supply should increase about 2.5%, an all-time low on the way to zero growth.
Bitcoin set to appreciate within 2019 range
Another year stuck in a trading range is likely for Bitcoin, yet with a greater propensity for a gain, in our view. Prices are more likely to edge toward 2019’s high of about $14,000, though they probably won’t stay below the trough at just above $3,300. Our graphic depicts Bitcoin set to remain within the previous year’s range for a third time. A primary metric for the price of the first-born crypto — addresses used from Coinmetrics — has stabilized, indicating similar for prices.
A good measure of demand, the 30-day average of addresses is equivalent to the Bitcoin price just above $7,000 when scaled vs. the 2019 range. Our estimate of the annual increase in supply from Mosaic is about 2.5% for 2020 and below 2% in 2021. At about 18.1 million coins at the end of 2019, the limit of 21-million is rapidly approaching.
Supply near peak, demand increase favors Bitcoin
A primary factor supporting Bitcoin’s price advance is a limited supply. It’s the opposite for the broad crypto market. Increasing adoption is the other side of the demand vs. supply balance, and the first-born crypto is winning as it evolves into a digital version of gold. Plenty can go wrong with a nascent asset, but unless the basic premises reverse — mass adoption and fixed supply — there’s a higher probability to sustain Bitcoin price appreciation vs. depreciation.
The balance is the opposite for the broad market. Our graphic depicts the parabolically increasing number of tradable so-called “cryptocurrencies” on Coinmarketcap.com. Continued underperformance of the broader market, as measured by the Bloomberg Galaxy Crypto Index, notably vs. the benchmark Bitcoin, should be expected in such a well-supplied environment.
Advancing gold prices set to be a top Bitcoin driver in 2020
Gold prices will keep climbing in 2020 and so should Bitcoin, in our view. The digital version of the metal is in the maturing process of consolidating the rapid price appreciation of its youth. Most of our indicators show Bitcoin more likely to continue trading within a range, with a greater propensity to advance with gold.
Bitcoin marking time near its sweet spot
Bitcoin’s price appears just about right in early January, using last year as a guide and based on our key demand indicators. The first-born crypto is in the sweet spot of the bell curve of 2019 traded prices and hovering at its 52-week mean and 10-day average of active addresses used from Coinmetrics. Of primary concern is the drop in adjusted transactions. This highly correlated price metric is about equivalent to Bitcoin closer to $5,000, vs. about $7,500 on Jan. 6 — the rough average price since 2017.
A seven-year high in the gold price in early January is a primary Bitcoin price support factor, which we expect to be more enduring. On a quarterly basis since January 2013, Bitcoin is about 0.93 correlated to the 10-day average of transactions and 0.70 linked to the 30-day average of addresses.
Bitcoin demand, adoption, declining volatility and futures
The stair-step pattern of advancing Bitcoin futures volume and open interest is sustainable, supporting a price foundation and pressuring volatility, in our view. Futures trading represents mainstream adoption, which is a primary metric for the world’s benchmark digital store-of value, quasi-currency with limited supply.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
The projected upper bound is: 8,902.19.
The projected lower bound is: 7,722.05.
The projected closing price is: 8,312.12.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 89.8256. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 16 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 70.84. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 21 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 263.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 5 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 20 period(s) ago.
Rex Takasugi – TD Profile
FOREX BTC= closed up 280.479 at 8,308.060. Volume was 51% below average (consolidating) and Bollinger Bands were 18% narrower than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 7,454.62 7,330.72 9,196.32
Volatility: 55 51 73
Volume: 84,745 88,150 85,887
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX BTC= is currently 9.7% below its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of BTC= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on BTC= and have had this outlook for the last 3 periods. Our momentum oscillator is currently indicating that BTC= is currently in an overbought condition.