As bitcoin approaches $14k, the institutional wave continues and markets experience uncertainty around US fiscal stimulus
Bitcoin has rocketed higher over the past week as a number of fundamental and on-chain trends align in favor of bulls. The price of the cryptocurrency currently is $13,700, a new year-to-date high and a price just shy of 2019’s highs at $14,000. In the past seven days, bitcoin has gained approximately 14%.
Bitcoin continued to outperform altcoins this week, with ETH only gaining approximately 6% in the past seven days as per OKCoin data. Su Zhu, CIO and CEO of Three Arrows Capital, says that bitcoin’s ability to outperform comes as a result of the speed of its rally.
Analysts are optimistic after the cryptocurrency printed its highest weekly candle close since January 2018, shortly after bitcoin peaked in late 2017. $14,000 is expected to be a tough region for bitcoin to cross, though, due to the level’s historical technical significance.
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TL;DR
- Bitcoin surged dramatically higher this past week, with the cryptocurrency reaching $13,700.
- $13,700 is the highest BTC has traded in over a year.
- Bitcoin outperformed altcoins this week as the rapid nature of the uptrend forced capital and attention on BTC, not altcoins.
- Institutional adoption continued this week with PayPal rolling out cryptocurrency support.
- Investors in the space expect these announcements to trigger more corporations and institutions to enter the bitcoin space.
Here’s your market snapshot:
All prices are in USD and time zones are PT. Prices are as of 10:40am PT.
The importance of $14,000 to bitcoin
Bitcoin’s recent price action has had analysts on edge as the $14,000 resistance is rapidly approaching.
Raoul Pal, chief executive of Real Vision and a former hedge fund manager, shared that $14,000 and $20,000 are the only macro resistances on bitcoin’s chart. $20,000 was the price at which the cryptocurrency topped in December 2017, and $14,000 was the level at which Bitcoin’s rally peaked in the middle of 2019. $14,000 also marked the December 2017 candle close.
Analysts are not expecting $14,000 to break easily. Considering the historical precedent, there is a considerable amount of order book “asks” in the $14,000 region.
Bitcoin should close above that level on a weekly or monthly basis to confirm it is acting as support. Then, it may act as a springboard to new highs.
On-chain data: Bitcoin’s short-term trend is “mostly bearish”
IntoTheBlock, a blockchain data and analytics firm, reports that despite the rally, bitcoin’s on-chain trends remain bearish in the extremely short term. The company reports that three of its seven core signals for bitcoin are “bearish.” The three are net network growth, concentration, and large transactions.
Data shared by crypto-asset analyst “Light” may further explain why Bitcoin is moving higher while its on-chain case is slow.
He noted that the amount of bitcoin being sent to exchanges has decreased dramatically over recent days. He sees this as a sign that investors are hesitant to sell their coins in the face of a potentially strong move to the upside.
It’s also worth noting that the Bitcoin network has become slightly congested as the hashrate of the network has dropped 20–45% in the past three days. Jameson Lopp, a long-time bitcoin investor, postulates that this is a result of Chinese miners relocating their equipment to new facilities to accommodate for it being the “dry season” in China:
“Bitcoin hashrate has dropped by ~45% over the past 3 days, presumably due to Chinese miners relocating equipment for the dry season. Hopefully, in the coming years the semi-annual hashrate fluctuations will decrease in volatility as China’s share of hashrate continues to drop.”
Due to congestion, fewer transactions can take place, thus driving IntoTheBlock’s metrics into “bearish” territory as aforementioned.
PayPal embraces crypto
By far the biggest story of the past week was the news that PayPal is embracing bitcoin and cryptocurrency a year after dropping out of Facebook’s Libra project.
Last Wednesday, a day after our previous Bitcoin Moves report, PayPal released a statement indicating it will be supporting cryptocurrencies.
“The migration toward digital payments and digital representations of value continues to accelerate, driven by the COVID-19 pandemic and the increased interest in digital currencies from central banks and consumers. PayPal Holdings, Inc. (NASDAQ: PYPL) today announced the launch of a new service enabling its customers to buy, hold and sell cryptocurrency directly from their PayPal account.”
This service will first be available in the U.S., then rolled out to the company’s over 300 million users in time.
PayPal is also expected to add support for cryptocurrency payments between its users and its merchants eventually.
The announcement highlights that bitcoin, ethereum, and other supported digital assets will not be able to be withdrawn or deposited within the platform. Also, some expect for the platform to charge high fees, touching on PayPal’s fee structure for its other products.
Although there are clear shortcomings in PayPal’s addition of cryptocurrencies, analysts see this move as notable for many reasons.
Analysts at JPMorgan’s Global Macro Strategy desk released a report late last week on their outlook on the cryptocurrency market.
Along with stating that they see bitcoin rallying “multiples” if it can continue to encroach on gold, the analysts said that PayPal’s entrance into the space will force other corporations and institutions to make an entrance. JPMorgan highlighted PayPal’s millennial clientele, which is likely to generate a lot more wealth and focus their efforts on Bitcoin and cryptocurrencies as opposed to traditional investments in the decades ahead.
Mike Novogratz, CEO of Galaxy Digital, touched on this further in an interview with Bloomberg and CNBC.
He said that bitcoin and PayPal both strongly outperforming traditional financial institutions like Wells Fargo will force the Wall Street old guard to take a look at this space.
Shortly after the initial craze, Bloomberg reported that its sources indicate PayPal is looking to go beyond offering a crypto-asset trading platform and support for crypto-asset payments. Sources said that the company is in talks with a number of cryptocurrency companies for acquisition. The only company named was BitGo, one of the largest digital asset custodians.
Paul Tudor Jones discusses bitcoin on CNBC
After the brunt of the rally, CNBC brought on Paul Tudor Jones, a billionaire fund manager, to discuss his thoughts on Bitcoin.
Tudor Jones wowed the industry earlier this year in May, when he revealed that he will be investing some of his fund’s capital into bitcoin futures. The investor called it the “fastest horse” amid the most uncertain and unorthodox macroeconomic periods in many decades, potentially ever.
In this interview, Tudor Jones continued to promote bitcoin, arguably even louder than he did the first time.
“The reason I recommended bitcoin is because it was one of the menu of inflation trades, like gold, like TIPS breakevens, like copper, like being long yield curve and I came to the conclusion that bitcoin was going to be the best inflation trade.”
Buying bitcoin now is like investing in Apple with Steve Jobs or Google early, Tudor Jones added.
‘Hasu,’ a pseudonymous crypto researcher, noted that this may have been one of the most bullish events for Bitcoin ever.
Hasu specifically highlighted Paul Tudor Jones’ comment that bitcoin is a bet on the good of humanity. In contrast, Tudor Jones said that a bet on bond yields to go down is a bet on the fallacies of human behavior.
“I’ve never seen a store of value where you also have [such] great intellectual capital behind it. […] When you short the bond market as an inflation hedge you’re really betting on the fallacy of mankind rather than its ingenuity.”
Fiscal stimulus uncertainty continues
Uncertainty around the next fiscal stimulus package has continued, which may serve as a headwind to Bitcoin despite the aforementioned trends.
After Amy Coney Barrett was confirmed to the Supreme Court, Senate Majority Leader Mitch McConnell adjourned the upper house of Congress. This puts a moratorium on fiscal stimulus discussions until the Senate returns to session after the election.
The expectations of another trillion-dollar fiscal stimulus bill was one of the key factors driving bitcoin and the stock market higher, along with the U.S. dollar lower.
It is unclear how the results of the election or other political trends will affect the magnitude or even chances of the next fiscal stimulus bill.
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