20.12.2020 | 11:33
The price of Bitcoin has surpassed $23,000, and analysts predict where BTC is headed after a major rally.
Bitcoin’s price easily topped $20,000 on its third attempt, driven by an increase in purchase volume. After the breakout, analysts anticipate that the dominant cryptomone will eventually rise to $30,000. In the short term, however, expectations of a reversal are growing.
There are convincing arguments for the cases of „up and down“ in the short term. Traders who are very optimistic in the short term claim that the rise of over $20,000 has confirmed a new upward trend. With no technical resistance above it, a continuation of the rally is anticipated. Because there is no historical data to rely on for more than $20,000, Bitcoin (BTC) has entered unprecedented territory.
Analysts who are cautious in the short term expect Bitcoin to face some setbacks in the near future. The $20,000 level remains an attractive support level because it’s the previous high reached in December 2017. A repeat of the previous peak would be a textbook technical pattern, which would readjust everything and make the derivatives market less saturated.
Where will Bitcoin go in 2021?
The option market is looking at a potential Bitcoin rally of $36,000 to $50,000 in the medium term. This shows that many option traders expect the Bitcoin rally to continue in 2021. A further upward trend in early to mid 2021 would mean that BTC replicates the post-halving trend it saw in 2017. In 2016, Bitcoin saw its second block reward reduction, and 15 months after that, it peaked at around $20,000.
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Denis Vinokourov, head of research at Bequant, told Cointelegraph that the price of Bitcoin in the options market at $36,000 during a rally doesn’t necessarily mean that traders expect it to reach $36,000. For example, he explained that the probability of reaching the $36,000 mark is currently at 12%, which is relatively low. Therefore, while $36,000 and $52,000 could materialize, for now, the probability remains low:
„The options market is as much about trading in mispricing and hedging as it is about directional play. The fact that there is a huge open interest resting on such a high mark does not mean that the underlying will trade there, although it is reasonable to expect some price attraction. There is also a high Open Interest at $52,000, but the delta (probability) is slim at four percent.
Guy Hirsch, eToro’s U.S. general manager, said that the interest on the options suggests that there could be a rally up to $30,000. But Hirsch stressed that it’s too early to call a spike for Bitcoin, especially considering that it has just surpassed the all-time high. It’s been less than 72 hours since BTC broke its all-time high, and it still hasn’t established a support level and short-term resistance levels.
The short term bearish scenario puts Bitcoin at $20,000
Both Vinokourov and Hirsch anticipate that crashes are likely to occur after the recent rally. Historically, throughout the upward cycles seen in 2017 and 2019, Bitcoin experienced 20-40% reversals, which were useful in readjusting the derivatives market. Pullbacks can make rallies more sustainable because they prevent bullish trends from overheating and being overwhelmed by buyers.
Hirsch told Cointelegraph that $20,000 and $15,000 are potential areas that Bitcoin could correct if confidence drops. But if Bitcoin’s momentum continues to strengthen, he believes Bitcoin could simply consolidate higher. Even if setbacks occur, Hirsch emphasized that the declines would be short-lived because of the clear increase in institutional demand. He explained, „Either we consolidate and go higher as institutions take advantage of the buying opportunity, or confidence falls and we see a drop possibly to as low as $15,000, as some, including JP Morgan, have suggested.
Analysts say that the law proposed by Mnuchin to prohibit the self-custody of crypto-currencies will not affect the price of Bitcoin
In general, analysts expect that large corrections, if they occur, will be bought by institutional investors quickly. Vinokourov said that if a takeover does occur, it would be institutional investors who would be able to buy out the correction.