- Experts and analysts are currently arguing whether Bitcoin has reached a global high in the current bull market
- Crypto News Flash has compiled arguments for a bullish and bearish scenario of Bitcoin.
Bitcoin is currently experiencing an extremely volatile and turbulent time. After the BTC approached the 35,000 USD mark yesterday, the price dipped below $32,000 USD once again at the time of writing. After reaching the new all-time high of $42,000 on 08 January, many investors are asking themselves whether the bull is already over or Bitcoin is merely experiencing a prolonged correction after the rocket-like rise from below 20,000 USD. Below we have compiled both bullish and bearish arguments.
Arguments for a bullish scenario of Bitcoin
1. Institutional investors are flooding the market
Arguably the most bullish argument at the moment is the invocation of a liquidity crisis by institutional investors. Grayscale, in particular, has been setting new records almost daily since the reopening of the Grayscale Bitcoin Trust (GBTC). Over the past week, Grayscale purchased 35,970 bitcoin, which is 5.7 times all new Bitcoin mined in the same time frame.
But not only Grayscale, but also MicroStrategy and other institutions are buying a large amount of the Bitcoin supply. Most notably, however, MicroStrategy has been making headlines lately with its repeated Bitcoin purchases. CEO Michael Saylor will hold a “Bitcoin for Corporations” conference in the first week of February, which “thousands of executives” will attend to learn how to invest in Bitcoin.
In addition to Grayscale and MicroStrategy, new institutions and companies are popping up weekly to reveal Bitcoin investing. New asset managers launching competitor products to Grayscale, such as SkyBridge Capital, founded by former Trump advisor Anthony Scaramucci, are also seeing massive inflows of capital.
2. Retailers are jumping on the Bitcoin bandwagon again
After interest from smaller investors remained rather comparatively low for a long time, even towards the end of 2020, as Google Trends data reveals, search interest has risen rapidly in recent weeks. Even if Bitcoin has not yet reached the level of 2017, the best-known cryptocurrency is receiving strong attention from the mainstream.
In recent weeks, more and more celebrities have also expressed interest or disclosed an investment in Bitcoin. In addition to financial giants like Stanley Druckenmiller, Paul Tudor Jones or Bill Miller, celebrities like Lindsey Lohan, Maisie Williams (Arya Stark in HBO’s “Game of Thrones”), NFL star Russell Okung from the Carolina Panthers or even rapper Meek Mill and Soulja Boy, just to name a few, have jumped on the Bitcoin bandwagon.
3. Money printing by the world’s central banks
Arguably the oldest narrative for a rising Bitcoin price is the seemingly endless money printing by central banks around the world. And while critics continue to cast doubt on Bitcoin’s “safe haven” status, the past year shows that the Bitcoin price has benefited massively from the FED’s Quantitative Easing (QE) policy. As central banks continue to print massive amounts of money in the coming months, Bitcoin could continue to be a winner from this policy.
Even former Federal Reserve Governor Kevin Warsh stated in a recent interview with CNBC’s Squawk Box that “any asset price that the U.S. government doesn’t control” and “the Federal Reserve doesn’t control” skyrockets. Warsh admitted that Bitcoin “makes some sense” to him in the current climate.
4. Bitcoin’s on-chain data continues to be strongly bullish
A continued bull run is also clearly supported by the on-chain data, which some experts even consider more important than technical analysis at the moment. Both the number of Bitcoin addresses and the hash rate reached an all-time high a few days ago. In their new weekly report, Glassnode writes that Bitcoin’s aSOPR (Adjusted SOPR) has declined after rising for several months.
This means that coins moving between investors per hour (24h MA) are on average no longer selling at a profit. For the SOPR to drop even further, investors would have to be willing to sell at a loss, which is unlikely given the current market conditions. Glassnode concludes:
As mentioned in previous newsletters, we have been looking for this reset in order to generate some stability in the market and pave the way for the next bull run. The chart above suggests that the current correction is coming to an end, providing a bullish signal.
On-chain analyst Willy Woo is also on the side of the bulls. Woo shared the chart below and explained:
The quantity of coins moving between investors remains very high. While normally we see discrete impulses of coin movements, this last month just looks like a single very large buying impulse, I’ve been calling this the “mother of all impulses”. This is bullish and should provide fuel for further upside once consolidation completes.
Arguments for a bearish scenario
1. Concerns about an overheated market and profit-taking
Some analysts believe that the rise in the Bitcoin price from $13,000 to as high as $42,000 in just 3 months happened too quickly and was driven by FOMO. According to them, the 28% correction from the all-time high to 30,000 USD might not be enough to cool down the and attract new investors.
2. Uncertain regulatory environment
Both the SEC lawsuit against Ripple, which may also affect the entire crypto market, and the still pending lawsuit against Tether (USDT) hover over the crypto market like a sword of Damocles. In addition, the U.S. is in transition to the Biden-administration. While Trump has been hostile to the industry, Biden has appointed “crypto-friendly” chairmen for the SEC and OCC.
Still, there is some uncertainty. Biden confirmed Janet Yellen to lead the U.S. Treasury Department. The former Fed chair has long been a major critic and only recently expressed “concerns about money laundering” with Bitcoin. Since markets abhor uncertainty, the bearish scenario could continue until regulatory clarity is established in the United States.
3. Bitcoin’s NUPL indicator signals global top
As Glassnode also elicited, Bitcoin’s NUPL (Net Unrealized Profit/Loss) is on the verge of crossing the green “Belief” zone and moving into the blue “Euphoria” zone. “This may suggest to some cautious investors that this represents the global top for this bull market,” Glassnode noted.
At the same time, Glassnode also states that NUPL did not quite reach the blue area at its peak earlier this month.
Its brush with the blue zone more closely resembles a similar event in mid-2017 (as shown by the green circles in the chart). After this event in 2017, BTC still increased by over 900%, showing that a near miss of the blue zone does not rule out significant further growth for bitcoin. In addition, other on-chain indicators suggest much more room for growth for BTC.