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Quant Analyst: Surging Stablecoin Supply To Drive Unprecedented Bitcoin Buy Pressure

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As Bitcoin soars toward a new all-time high and has recaptured the interest of the world of finance, a sizable supply of liquidity is building on exchanges, not in BTC, but in stablecoins. The rising supply alongside surging crypto valuations suggests that the recent rally is “liquidity-driven,” according to one cryptocurrency quantitative analyst.

That liquidity as it continues to stack up on exchanges everywhere could soon bring the most “unprecedented buying pressure in history” to the crypto market. Could the likes of Tether and USD Coin be the key to unlocking the prices in Bitcoin that experts someday predict?

“Liquidity-Driven Market Rally” Takes Bitcoin To Nearly $20,000

Bitcoin price is nearing $20,000, and at this point, the asset has gone parabolic, and most technical analysis has gone out the window. Trendlines no longer hold the unstoppable cryptocurrency back, and indicators have been overheated for weeks on end with not so much as a stumble, let alone a significant pullback.

Beyond technical analysis, fundamental analysis – consisting of quantitive and qualitative analysis – can also be used to determining the health or strength of an asset and its expected performance. Data showing that BTC was moving off of exchanges was perhaps the most useful information leading up to the recent rally.

RELATED READING | FOMO BEGINS: BITCOIN ADOPTION EXPLODES TO HIGHEST LEVEL SINCE PREVIOUS PARABOLIC PEAK

With no BTC on exchanges to buy and a diminishing supply, a sell-side liquidity crisis played out, sending the cryptocurrency from $10,000 to $20,000 in a few months flat.

With Bitcoin still trending hard and technicals remaining unreliable, quantitative data is king. And according to a leading crypto quant analyst, there is plenty of reason for more upside. In fact, billions and billions of reasons are pilling up on exchanges right now.

Crypto Quant CEO: Stablecoin Supply To Drive “Unprecedented Buying Pressure”

According to Ki Young Ju, CEO of Crypto Quant, the stablecoin supply is growing rapidly on cryptocurrency exchanges. This liquidity, he claims, will soon drive “unprecedented buying pressure” in crypto markets. The capital pouring in tells the CEO that the current rally is liquidity-driven, and is set to continue henceforth.

RELATED READING | WHY THE RECORD $5,000 BITCOIN MONTHLY CLOSE COULD SOON BECOME THE NORM

The data is yet another factor backing up the theory that Bitcoin has begun a new bull trend, and could reach some of the astronomical prices that experts predict.

Bitcoin rallies with each injection of more Tether into the market | Source: BTCUSD on TradingView.com

In the past, sharp-eyed crypto analysts notice a correlation between new Tether minted and Bitcoin rallies. That relationship is all due to the liquidity that the stablecoin supplies, which eventually flows into the Bitcoin and crypto market cap.

But liquidity pouring in like never before, things will only get more bullish for Bitcoin and crypto from here on out.

Featured image from Deposit Photos, Charts from TradingView.com and Crypto Quant





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Eerie Gold Fractal From 2020 Leaves Bitcoin Exposed to $27K-Retest

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Bitcoin’s price correction from its record high of approx $42,000 in early January appears eerily similar to that of spot gold in August 2020.

In retrospect, the precious metal rallied to its all-time high of $2,075.28 on January 8. Its wild move upward prompted traders to secure profits. As a result, the XAU/USD exchange rate started correcting lower in the later sessions. The pair formed a support area between $1,847-1,863, which it eventually broke in late November, falling to as low as $1,764.

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Spot gold broke bearish on its descending triangle pattern, only to reclaim its support level less than a week later. Source: XAUUSD on TradingView.com

Gold-Bitcoin Similarity

Marc Principato, the executive director of digitally-operated Green Bridge Investing, highlighted gold’s growing influence over the Bitcoin market in a note published Sunday. Just like the precious metal, the flagship cryptocurrency formed a consolidating descending channel pattern after forming its record high, leading Mr. Principato to envision BTC/USD at $27,500.

“If 27.5K is compromised, for our strategy, that will signal a broader consolidation is likely in play,” he added. “If you want to get a better idea of what this scenario may look like, look at XAUUSD from August to December. This is NOT a prediction; it is a potential scenario to prepare for if Bitcoin chooses to go this route.”

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin is halfway copying gold price’s moves between August and December. Source: BTCUSD on TradingView.com

So it appears, Bitcoin came halfway across copying the gold market’s moves from 2020. The cryptocurrency now tests the $30,774-30,188 area for a potential breakdown towards the downside support target. Apprehensively, that level could be near $27,700 or $23,500.

“The 27.5K to 32K area so far has proven to be supportive,” reminded Mr. Principato, nonetheless.

“There is a failed low formation in play on the daily time frame while at the same time a new sell signal is about to confirm. As long as 27.5 continues to hold, probability favors an eventual bullish break out in the short term. This can take place over the next week or two,” he added.

The analogy appeared reminiscent of gold’s rebound after hitting $1,764 in November. As the precious metal moved back upwards, it reclaimed the $1,847-1,863 area as support and went on to hit sessional highs near $1,959. Nevertheless, it is now consolidating inside the same range.

Bitcoin draws major comparisons from gold for its safe-haven, anti-inflation, and anti-fiat narratives. Many analysts, including strategists at JPMorgan and Guggenheim Partners, believe the cryptocurrency would mousetrap a portion of gold’s market in the future due to its demand among millennials.



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Bitcoin Sell-Off Triggers Classic Bearish Reversal Pattern; $20K Next?

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An overnight sell-off in the Bitcoin market Monday brought its prices down from an intraday high of $34,888 to as low as $31,435.

The approx 10 percent decline occurred as traders’ anxieties mounted over a JPMorgan report that cast doubts over Bitcoin’s potential to retest $40,000. According to Nikolaos Panigirtzoglou, the lead strategist at JPMorgan & Chase, one of the major catalysts behind Bitcoin’s supersonic rally was the Grayscale Bitcoin Trust, which amassed about $20 billion worth of BTC during its 1,000 percent price rally.

Nevertheless, the last couple of weeks saw a decline in the New York fund—of about 22 percent—that surpassed Bitcoin’s very own downside correction of 17 percent.

Mr. Panigirtzoglou added that a drop in Grayscale’s accumulation spree might hinder Bitcoin’s attempt to reclaim $40,000 or the levels above it, adding that “the near-term balance of risks is still skewed to the downside.”

Bitcoin Descending Triangle

The bearish fundamental risked activating a classic bearish reversal pattern that has emerged on the Bitcoin charts lately. The BTC/USD exchange rate has been forming a sequence of higher lows on repeated upside rejections while holding its footing at a horizontal support area. The pattern appears like a Descending Triangle.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin’s Descending Triangle pattern risks crashing price to near $20,000. Source: BTCUSD on TradingView.com

In retrospect, a Descending Triangle’s formation in an uptrend points to a reversal.

Most traders look to open a short position following a high-volumed breakdown from the pattern’s lower trendline support. Typically, the price target is as much as the Triangle’s maximum height. In Bitcoin’s case, it is more than $11,000 that puts the cryptocurrency at risk of slipping below $20,000.

Nevertheless, certain adjustments to the support trendline change the entire bearish setup by turning Descending Triangle into a Bull Pennant.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin’s Bull Pennant setup expects the price to surge by another $20,000. Source: BTCUSD on TradingView.com

So it appears, Bitcoin has simultaneously formed lower highs alongside the higher lows, forming a Symmetrical Triangle in an uptrend. In retrospect, it is a bullish continuation pattern that could have traders open long positions following a high-volume breakout above the Triangle resistance trendline.

The Pennant’s upside target is as high as the flagpole formed before it (~$20,000). That puts Bitcoin en route to at least $50,000 should the bullish bias sustain.

Bullish Fundamentals

Fundamentals that could trigger Bitcoin’s Bull Pennant include the US coronavirus stimulus, the Federal Reserve’s pro-inflation policies, and a bearish outlook for the US dollar. That has prompted many corporations and investors to seek hedge in Bitcoin due to its similarities with safe-haven gold.

“We’re talking about Bitcoin over the next three, five, ten years slowly inching away at gold’s market capitalization,” Vijay Ayyar, head of Asia Pacific with Singapore-based crypto exchange Luno, told Bloomberg Tuesday. “If that happens, you are way over $50,000.”

BTC/USD was trading above $32,000 at the time of this writing.



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Glassnode predicts BTC break-out as investors refuse to realize losses

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On-chain metrics are indicating that continued downward pressure on the price of Bitcoin would result in many investors facing losses.

A Jan. 25 report published by crypto data aggregator Glassnode has noted that Bitcoin’s adjusted Spent Output Profit Ratio, or aSOPR, suggests that a further decrease in prices will leave many investors in the red according to when their holdings last moved on-chain.

Despite the metric suggesting few investors are sitting on paper-profits, Glassnode interprets the data as bullish, stating:

“In order for SOPR to go lower, investors would have to be willing to sell at a loss, which is unlikely given the current shape of the market […] 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.”

Glassnode describes the indicator as representing the profit-ratio of coins based on the price of Bitcoin when they were last moved on-chain. As aSOPR is an on-chain metric, BTC circulations on centralized exchanges are not counted.

While SOPR should typically oscillate near 1, the extreme bullish momentum of recent months saw Bitcoin’s aSOPR spike above 1.15 for the end of December and the first half of January.

However, during bullish market conditions, values of aSOPR below 1 are rejected as traders are reluctant to sell at a loss.

Glassnode noted the aSOPR chart suggests that the current correction is coming to an end. From peak to trough of its recent, Bitcoin had corrected 31% when it fell just below $29,000 on Jan. 22. Bitcoin was trading hands for $31,750 at the time of writing.

On Jan. 25, Glassnode also reported that 2.3 million BTC or 12.6% of Bitcoin’s circulating supply moved on-chain while BTC was trading above $30,000, flagging the activity as bullish:

“This is substantial, given that BTC crossed $30k just this year. It suggests investors are injecting capital, and therefore confidence in further price appreciation.”





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