Bitcoin Price Prediction: BTC Retraces After Touching $40,000
Daily Bitcoin BTC Technical Analysis
- Bitcoin has healthy support at the $35,000 line
- The number of new daily addresses has reached its highest point since December 2017.
This Thursday, Bitcoin managed to cross the $40,000 psychological level for the first time ever. But since then, the price has retraced. Will BTC go back up to these levels any time soon? Let’s check it out.
Bears Step In For A Correction
Prior to this Friday, the price jumped from $32,000 to $40,000. The bears have now stepped back into the market and corrected it to $38,300. However, several indicators suggest that this is merely a temporary correction.
Image: BTC/USD daily chart
The moving average convergence/divergence (MACD) shows sustained bullish momentum, which indicates that the overall market sentiment is positive. Looking at IntoTheBlock’s IOMAP, we can see a healthy support level at $35,000. Previously at this level, 484,250 addresses had purchased 308,000 BTC.
In the 4-hour chart, this support zone coincides with the 20-bar SMA. Today’s correction helped the relative strength index (RSI) dip back into the neutral zone from the overbought zone, indicating that this correction is a temporary one. The parabolic SAR still suggests that the overall market sentiment is bullish.
Image: BTC/USD 4-hour chart
Adding further credence to our bullish outlook is the number of new addresses entering the network. Between January 1 and January 7, the number of addresses entering has jumped from 445,500 to 685,390.
This is the highest number of new addresses that has entered the protocol since December 2017.
CNBC’s Jim Cramer Treats Bitcoin Like a Stock
Jim Cramer, the host of the “Mad Money” show on CNBC, recently said that he’s been treating Bitcoin like a stock in handling the recent price run. In an interview with Katherine Ross, Cramer gave his predictions for assets in 2021, including the future performance of BTC.
Cramer mentioned that he initially bought Bitcoin “more as an asset” than trade and said that he intends to hold a portion of it in his portfolio. He purchased BTC after appearing on a September podcast with Anthony Pompliano when the flagship crypto was trading around $10,000.
Cramer said his initial investment had doubled following Bitcoin’s latest price rally, causing him to follow his rule of selling off the cost basis.
I’m not doing anything I wouldn’t do with a stock…I’m gonna say hold on.
The host warned investors that BTC had likely entered the speculative territory, rather than functioning as a currency. He added that he would consider purchasing additional BTC if the price fell back into the $14,000 to $18,000 range.
PayPal’s Bitcoin Volumes Cross $100 Million
Since November, the buying and selling volumes of Bitcoin on PayPal has surged 5x, Going up from around $20 million to the current levels of $100 million. According to itBit, the volumes are now up 10x since before PayPal launched.
The payments giant will also soon roll out BTC payments to its 26 million merchants. This will make BTC and ETH payments easy and streamlined. It appears that this has also fueled Bitcoin’s price rally as it indicates that it's not just institutional investors who are driving the price, but the general population too. PayPal has made it easier for people with a PayPal account to enter the Bitcoin market as they don’t have to open a new account at Coinbase.
Dan Morehead of Pantera Capital said:
“When PayPal went live, volume [at itBit] started exploding. The increase in itBit volume implies that within two months of going live, PayPal is already buying more than 100% of the new supply of Bitcoins.“
At the current rate, PayPal is nearing $1 billion in weekly volumes. It recently doubled from $40 million daily volumes to $80 million.
~80% of Bitcoin Supply Is Presently Illiquid
78% of the Bitcoin supply is currently held by illiquid entities storing the asset with no plans of selling, as per Glassnode. The analytics company mentioned that the metrics used to calculate Bitcoin's potential liquidity considers the amount of Bitcoin that is yet to be mined and how much Bitcoin has potentially been lost over the past decade.
If there are fewer BTC tokens available for a growing audience, the selling pressure drops as more investors will want to hang onto their holdings. This could have a bullish result as the demand for the asset increases.
Since the Bitcoin's supply is limited, and mining rewards are now less post-halving, generating more Bitcoin to meet the surging demand is difficult. An excerpt from the report reads:
“Quantifying Bitcoin’s liquidity is essential to understand its market. If many bitcoins are illiquid, a supply-side crisis emerges – which has a weakening effect on BTC’s selling pressure in the market. Or put differently: A sustained rise of illiquid bitcoins is an indication of strong investor hodling sentiment and a potential bullish signal.”
Institutional interest has been one of the largest factors contributing to Bitcoin’s ongoing bull run. This interest implies a longer-term holding strategy rather than volatility in the market.
Key Price Levels To Watch For BTC
The $35,000 support line is robust enough to absorb an immense amount of selling pressure and prevent any further downtrend. On the upside, it will be interesting to see how the buyers behave when BTC reaches the $40,000 psychological level again.