Speculation about the duration of the current run is quite endless, with BTC now turning into a stable news item even in the mainstream press. But what is keeping the price of bitcoin flying high? Is it the relentless slew of good news or could there be on-chain indicators that can project future price moves?
Are these prices being sustained due to a constant stream of good news, or is there more at play? Since the crypto retested the $50,000 barrier early last month, the BTC price has managed to hold constantly above this level. Even a pullback in the last week of March could not dominate, with the bulls pushing the prices back up toward a new all-time high just below $65,000.
The FOMO Effect
The debate that good news is underpinning the market is self-evident just because it is undeniable that there is some form of FOMO snowball effect among the institutions in recent months.
Notably, the bull run started in the last quarter of 2021, and the fact that prices abruptly spiked in October amid news that PayPal had decided to enter the crypto space cannot get ignored. More bullish action followed when JPMorgan lunched its long-awaited JPM coin.
In 2021, MicroStrategy went on a massive buying spree which was accompanied by Tesla’s endorsement with a $1.5 billion investment. The large banks, including Citigroup and Goldman Sachs, expanded their service offerings to cryptos also added more credibility to the debate that cryptocurrency is taking its rightful place as an established asset class.
Recently, the excitement of Coinbase’s listing on Nasdaq, which is the first of its kind in the crypto sector, has also played a huge part in guaranteeing that digital assets remain strongly on the global news agenda.
Taking a look at the macro level, the current push to get a Bitcoin ETF approved by the US regulators also offers more bullish sentiments. But, in the view of one popular analyst, it might still be another two years before approval is seen.
$25,000 Might Have Been An Institutional Price Trigger
While this theory that good news is propping up the prices of bitcoin might not create a long-term bull case in and of itself, the market action has notably been adequate to make the large investors and institutions sit up and take a lot of notice. The report from eToroX published in January that interviewed institutional players appears to agree with that hypothesis.
The report discovered that bitcoin had to reach a high enough price to make it somewhat attractive to the institutions when balanced against other barriers to entry, including the possibility for fraud, regulatory risk, and access to the essential infrastructure.
One respondent even went as far as defining the price threshold of $25,000, showing that the current prices are more than adequate to keep the institutional investors engaged. The CEO of KuCoin, Johnny Lyu, also thinks that the underlying fears about the state of the wider markets are playing an integral part in institutional crypto adoption. He told reporters:
“The recent rise is related to the fear of long-lasting quantitative easing and global inflation.”
He also explained an in-depth look by saying:
“Trading behavior on KuCoin shows that Western investors are more involved in this run compared to their Asian counterparts.”
The rationale here is that the Western nations have proven less capable of effectively handling the spread of COVID-19, resulting in a lot of government spending and a major economic impact. Nonetheless, a market analyst at OKEx Insights, Robbie Liu, pointed out that there is still considerable interest from the Asian investors. He mentioned that the appetite for stablecoins is a majorly bullish signal:
“In the Asian market, USDT also entered a positive premium since March, meaning one USDT has traded above one U.S. dollar. This premium similarly reflects strong demand for access to the cryptocurrency space.”
When Good News Is Not Always Good News
The challenge with the idea that prices are driven wholly by positive sentiment resulting from news headlines is that it does not create a case for long-term price sustainability. To put it simply, if the good news dries up, the prices may reverse, creating a similar snowball effect of bad news in a plunging market.
Taking matters from that perspective, it is worth examining some of the on-off-chain fundamentals that may be driving prices. Here, there are multiple reasons for the traders and investors to remain positive. Nevertheless, some fundamentals suggest the 2021 bull run is not yet over. Glassnode data shows that the volume of bitcoin held on the exchanges is on a continuous downside trajectory, reducing liquid supply.
Nonetheless, the total number of addresses holding more than 1,000 BTC recently hit an all-time high, showing that more whales than ever are now choosing to hold. The miners have also recently joined the trend, accumulating more bitcoin than they are selling. If to use the theory of the market cycles, it appears inevitable that the bull market will end at some point, but the question is when.
All Signs Show Everyone Is Hodling
If selling activity is a form of an indicator, the peak is still some way off. Based on a recent report, the long-term holders are proving to be reluctant to let go of their investments. That normally happens in the second half of the market cycle as they seek to take profits. Thus, the bull tun is normally strange, based on previous price peaks.
The profit-seekers normally cash out after holding between one week and one month. In this case, they are holding firm. Interestingly, the realized hodl ratio chart also backs up the view, as it is reliably correlated to all of the previous reversals in bitcoin macrocycles. As it is evident from the market charts, when the ratio reaches some level above 50,000, the bull market is almost reaching its peak.
In the case of history managing to predict the future, it will show that the bull run is just about halfway through the cycle, which shows that a $100,000 bitcoin price before the end of the year is almost possible now. One Bitcoin analyst at crypto advisory firm Quantum Economics, Jason Deane, avoided giving a specific price prediction. But, when speaking to reporters she said:
“Over the longer term, the continued reduction in available Bitcoin on exchanges is very likely to become a bigger factor in price discovery as more and more is removed for very long-term cold storage and new supply, via future halvings, continues to reduce.”
The head of communications at Bybit exchange, Igneus Terrenus, says that the current speculation seen on the derivatives space can show a lot about what to expect from the rest of 2021. He told reporters:
“With June, September, and December futures trading at high premiums, we can surmise that the market is betting on the bull run to continue for the rest of 2021.” He further added that: “In the longer term, where BTC price goes is as much dependent upon its fundamentals as the strength of the [U.S.] dollar.”
$500,000 And Above?
Based on quant analyst PlanB, the stock-to-flow (S2F) predictions show that the bull run is in an even earlier part of the cycle than the hodl statistics indicate. This analyst’s “Situational Awareness Stock-to-Flow Cross-Asset Model” chart tracked the previous bull runs with eye-opening precision, and hopes are growing among the hodlers that this time around it will not be any different.
My favorite chart for Situational Awareness: S2FX for rough long term level forecast (white line), combined with accurate on-chain bull/bear recognition signal (color overlay). #InOrbeTerrumNonVisi pic.twitter.com/KZcZCzldgI
— PlanB (@100trillionUSD) April 4, 2021
If you extrapolate the current bull/bear recognition signals, PlanB’s projection using the S2FX model forecasts a 2021 high of $288,000. Nonetheless, the price peak during the bitcoin mining reward halving cycle may go as high as $576,000, with 2021 high forming a mean for the whole cycle.
If that seems overly ambitious, then bear in mind that there is no precedent in BTC’s history for the type of institutional inflows that are being seen today, leave alone the reduced liquidity as investors aim to hoard their holdings. Thus, even the past bull patterns might not be the most reliable predictors for the cycle.
In general, the solid fundamentals together with a continuing sense of FOMO from the institutions mean that there is a strong case for thinking that the current bull market will keep running for a lot of time to come.