After all the good news failed to push Bitcoin to new all-times highs last week, many people are now starting to question: If the stimulus couldn’t do it, what will? Is this rally coming to a close?
While these are good questions to consider, I don’t think it’s yet the time to panic as this article will explain why. Here we go.
Tesla Now Accepts Bitcoin as Payment
In a twitter thread posted yesterday, Elon Musk said, “You can now buy a Tesla with Bitcoin… Bitcoin paid to Tesla will be retained as Bitcoin, not converted to fiat currency.”
Therefore, Musk is expecting that Bitcoin will be a better store of value than fiat currency over a future timeframe, which should be a bullish indicator for Bitcoin.
Anyone calling the top now would be betting against Elon and expecting Tesla to lose value. For example, let's say that 100 people buy a Tesla Model X with Bitcoin for $88,000 today when the Bitcoin price is $52,000.
That would cost the buyer 1.7 Bitcoin so Tesla now has 170 Bitcoin in their wallet. The total dollar value of that Bitcoin would for now be $8.8 million but if the Bitcoin price suddenly crashed to $20,000, it’d be worth $3.4 million or a 60% loss.
If on the other hand, the Bitcoin price went to $100,000, that 170 Bitcoin would now be worth $17 million for a 92% gain.
Hence, Elon clearly sees the value of Bitcoin appreciating rather depreciating, and therefore, he’s now selling Teslas at a premium. The question is: Are you willing to bet against him?
Bearish Indicator: Decreasing Volume
A mildly bearish indicator is the decreasing volume we’ve seen on Bitcoin since January this year.
As you can see on the BTC/USD daily chart, there was increasing volume on the run-up to 42,000 but since the drop to $30k, volume has been falling, showing that the rally may be losing steam.
Many bears have already been calling it bearish divergence as the price has been going up while volume’s going down. However, I’m seeing it as nothing more than consolation as there’s no sign of significant panic selling yet.
MuroCrypto on twitter has also been saying the same. His recent price analysis says that we probably go sideways for a few weeks and potentially retest the lows at $45,000 before going higher.
This would also align with the options narrative, where Bitcoin derivative bets are set to expire on Friday and this has shown to affect price action in the past. As twitter user ‘jamesviggy’ charts:
This month, a record $6 Billion in options are set to expire, and this has sat many traders on the sidelines as they wait for a plunge to lower levels.
If Friday's price action doesn't cause another downwards correction, however, a major overhanging pressure would be lifted and this could spark a bullish rally.
In the short term, I’m looking for the daily SuperTrend levels to hold as support since all the lower timeframe indicators have already flipped bearish.
If these levels fail to hold it’s likely we will go lower to test the $45,000 level. If price breaks to the upside, however, there is immediate resistance at $58,300 to watch for.
As always, this article is intended for informative purposes only, and should not be used as financial advice. Before making any financial investments, please do your own research.