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Bitcoin Eyes Bull Run Towards $40K Ahead of Biden’s Stimulus Plan

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Bitcoin extended its recovery trend as traders shifted their focus on Joe Biden’s stimulus plan expected later on Thursday, hoping that a generous spending package would pressure the US dollar and boost demand for alternative safe-haven assets.

The US president-elect’s proposal expects to increase the federal deficit by around $2 trillion.

His bill might contain financial support for state and local governments and a direct check payment worth at most $2,000 to American households. Tom Block, Washington policy analyst at Fundstrat Global Advisors, told CNBC that the Thursday bill could also include an extension of the eviction moratorium and “hundreds of billions” in government aid.

Friday’s labor market data, which showed that employers trimmed about 140,000 jobs in December, has increased the need for larger government spending. Bulls in riskier markets see it as a clue for a weaker US dollar ahead. Meanwhile, Bitcoin speculators watch the entire macroeconomic development as a catalyst to push the cryptocurrency to a new record high.

“Bernie Sanders takes over budget with total deficit worst in 40 years,” said macro analyst Dan Tapiero on the newly-appointed chairman of the Senate Budget Committee. “Interest rates cannot rise with a massive debt load. [The] dollar bear market must continue or equities will suffer. [A] perfect backdrop for gold and bitcoin.”

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US Fiscal Deficit hits worst levels in 40 years. Source: Dan Tapiero

Bitcoin Rally Resumes Momentum

The benchmark cryptocurrency did react well to the stimulus narrative. Its rate per token surged to $38,800 in an early London session, up about 29 percent from its session low near $31,000. Nevertheless, Bitcoin was trading still lower from its record high of $41,986.

Many traders noted that the cryptocurrency would reclaim its previous peak—and form a new one in the sessions ahead. One of them—a pseudonymous analyst—noted that Bitcoin flipping $36,500 from resistance to support provides it an ideal footing to continue its rally to a new high.

“Reclaim $39.5k next and then we can attack the highs,” he claimed.

Meanwhile, another analyst drew two sloping trendlines around Bitcoin’s recent downside correction and pullback move, making it look like a Bullish Pennan structure. That also hinted at an upside continuation—by as much as the size of the previous upside move, which easily puts Bitcoin en route to over $42,000.

Stablecoin Inflow

Mr. Biden’s stimulus bill prospects also coincided with an increase in stablecoin deposits across all the exchanges. Data analytics firm CryptoQuant noted that the sideline capital moved back into the trading platforms, pointing to a potential uptick in cryptocurrency buying.

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Stablecoin inflows into crypto exchanges rise as Bitcoin reclaims $37K. Source: CryptoQuant

Stablecoins, such as Tether, act as de-factor dollar tokens due to their 1:1 pegging with the greenback. Tether’s supply increased from $20 billion to $24 billion in over a month, pointing to higher demand.





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Bitcoin Fractal That Crashed BTC/USD by 50% Flashes Again in 2021

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Bitcoin is showing signs of replicating its trend from 2019 that crashed its prices by more than 50 percent.

According to a fractal first spotted by TradingShot, an independent trade analytics firm, the flagship cryptocurrency’s downside correction move from its recently-established record high near $42,000 is very similar to its plunge in June 2019. That risks putting BTC/USD en route to deeper price levels in the monthly sessions ahead.

“Notice that both 2019 and today’s Parabolic Rises share a few common characteristics,” said TradingShot analysts in a note published Wednesday.

“Both rose by approximately +385% from the time they last made contact with their 1D MA50 until their respective peaks,” they added. “Both pulled-back from their peaks by approximately -30% on the low before contact was again made with the 1D MA50. At the time of the 1D MA50 test, the RSI was on the Support Zone.”

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Bitcoin 2019 and 2021 price moves comparison. Source: BTCUSD on TradingView.com

Bitcoin tested the 50-day moving average as support on Wednesday as its price slipped below $30,000. The cryptocurrency retraced its way to the upside upon facing a comparatively higher buying pressure. Nevertheless, its bullish bias appeared limited owing to a stronger US dollar, reiterating TradingShot’s fears of a 2019 fractal-repeat.

The firm said BTC/USD would need to hold above 50-DMA if it wants to keep its bullish outlook steady. But if the pair breaks bearish on the support, then it risks falling to the next moving average in the queue—the 100-DMA. As of now, it is sitting near $23,000, down 45 percent from Bitcoin’s record high near $42,000.

Meanwhile, if BTC/USD stays above the 50-DMA, its likelihood of continuing its rally back towards $40,000 and beyond would increase.

Converging Bitcoin Indicators

The TradingShot’s 2019 fractal theory matches bias with other technical indicators that, too, point at a further bearish breakdown in the Bitcoin market.

For instance, BTC/USD is fluctuating inside what appears to be a Descending Triangle. Chartists perceive the pattern as a bearish reversal indicator at the end of an uptrend. Typically, the Descending Triangle’s downside target is as much as the maximum distance between its upper and lower trendlines.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin Descending Triangle breakdown warns about a correction to levels below $20,000. Source: BTCUSD on TradingView.com

In Bitcoin’s case, that distance is nearly $13,000. That puts the cryptocurrency en route to its 200-day moving average that sits near $17,000.

The Bullish ‘What If’

Meanwhile, Jonny Moe, an independent market analyst, notes that the Descending Triangle could also shapeshift into a Falling Wedge pattern, which is bullish.

“I don’t think this is what we’re in for, but it’s at least worth acknowledging, the bull case here is that this isn’t a giant descending triangle, it’s some sort of falling wedge type pattern that would form a bottom basically right about where we are now,” he said.

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Bitcoin Falling Wedge patterns points at a bullish breakout. Source: BTCUSD on TradingView.com

In either case, it appears Bitcoin would retest the 100-DMA as suggested by TradingShot.





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Bitcoin Reclaims $30,000 After Fed Keeps Policy Steady; What’s Next?

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Bitcoin prices reclaimed $30,000, a psychological support level, hours after slipping below it during the New York session Wednesday as investors assessed Jerome Powell’s decision to keep the Federal Reserve’s dovish policies steady.

The US central bank chief asserted that his office would hold the benchmark interest rates near zero while purchasing government and corporate bonds at a rate of $120 billion per month. He noted that their expansionary policies would stay firm until the US economy achieves maximum employment and inflation above 2 percent.

“The [coronavirus] pandemic still provides considerable downside risks to the economy,” Mr. Powell stressed.

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Bitcoin recovers back above $30,000. Source: BTCUSD on TradingView.com

Bitcoin climbed to an intraday high of $31,880 after Mr. Powell’s comments, only to pare a small portion of those gains while entering the early Asian session Thursday. The benchmark cryptocurrency was trading near $31,500 at the time of this writing on low volumes, suggesting an underlying short-term bias conflict among traders in the market.

That is partially due to a stronger US dollar. The greenback closed Wednesday 0.53 percent higher at 90.64 against a basket of top foreign currencies. Meanwhile, US stocks notched their worst day of 2021, with the benchmark S&P 500 and the tech-savvy Nasdaq Composite each plummeting 2.6 percent. Gold fell 0.23 percent.

Bitcoin against Falling Yields

Investors instead clamored into government bonds. The rally in the benchmark US 10-year Treasury note sent its yield briefly below 1 percent on Wednesday. Later, it settled at 1.01 percent. Traders in the Bitcoin market perceives lower bond yields as their cue to increase their bids on the cryptocurrency.

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US 10-year Treasury yield plunges as demand for bonds rises. Source; US10Y on TradingView.com

Josh Rager, an independent market analyst and head of BlockRoots.com, meanwhile focused on Bitcoin’s technical prospects as it remained choppy around $30,000. Recalling the cryptocurrency’s price movements from the past, he noted that BTC/USD has a habit of entering prolonged consolidation periods after its parabolic moves. And the current situation is no different.

“Back in 2016-2017, there were times when Bitcoin hit a local high, followed by a pullback where it took several weeks to a couple of months for the price to reclaim the high and move higher up,” Mr. Rager tweeted. “Be patient here — Bitcoin will hit another high, but it may take weeks to get there.”

Bubble Woes

But skeptics noted bubble-like features in the Bitcoin market as it swelled by more than 1,000 percent in just 10 months of trading.

Deutsche Bank surveyed 627 global market professionals earlier in January to rate the ongoing market bubbles on 0 to 10, with 10 pointing to “extreme bubble.” Bitcoin got a score of 8.7.

But even sovereign debt has become a bubble, believes Luke Gromen, the founder of research firm FFTT.

“I think at a very minimum, before this is all said and done, we’re likely to see negative 5-10% real interest rates in the U.S.,” he told Blockworks.

“I think at this point, Bitcoin has been on top in terms of performance, but I think it’s all being driven by the same dynamic, which is this bursting global sovereign debt bubble,” he added.





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Guggenheim says institutional demand not enough to keep BTC above $30K

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Guggenheim’s Scott Minerd has come out with another gloomy price outlook for Bitcoin stating that there is not enough institutional demand to keep the asset over $30,000.

The chief investment officer of the financial services firm told Bloomberg Television the institutional investor base was not big enough to sustain the current prices.

“Right now, the reality of the institutional demand that would support a US$35,000 price or even a US$30,000 price is just not there. I don’t think the investor base is big enough and deep enough right now to support this kind of valuation.”

Minerd added that Bitcoin is still a viable asset class in the long run. Since its all-time high of $42,000 on January 8, Bitcoin has corrected 27% to current prices around $30,600. Three prominent lower highs on the chart suggest that the downtrend is strengthening.

The Guggenheim executive also thinks that this downward pressure has a lot further to go, adding that it is “not uncommon to see squeezes like this”:

“Now that we have all these small investors in the market and they see this kind of momentum trade, they see the opportunity to make money and this is exactly the sort of frothiness that you would expect as you start to approach a market pop.”

On January 20, Minerd told CNBC that he expects prices to fully retrace back to $20,000. If this scenario plays out, it would entail a correction of more than 50%, and that has happened several times during previous market cycles. The last time BTC fell by over half was in March 2020 when it dropped from just over $10,000 to below $5,000 in just three weeks.

Guggenheim has not changed its stance on the long term outlook for Bitcoin, however, with Minerd stating in December that the firm’s fundamental work has shown that Bitcoin could be worth about $400,000.

As Bitcoin approaches this psychological support level at $30,000, the imminent expiry of $4 billion in BTC options could favor the bulls according to analysts.



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