From November to December in 2017, the worth of Bitcoin (BTC) skilled a parabolic uptrend to a brand new all-time excessive at $20,000.
There are three causes Bitcoin would possibly see an identical pattern within the upcoming months. First, the post-halving cycle is coming into impact. Second, the relative energy index (RSI) exhibits room for an even bigger rally. Third, the rally shouldn’t be overheated, at the very least within the derivatives market.
Lengthy-term RSI exhibits Bitcoin not overbought
PlanB, the creator of the Inventory to Move (S2F) indicator, shared a long-term RSI chart of Bitcoin. The indicator, which measures whether or not an asset is overbought or oversold, exhibits BTC continues to be at a impartial stage.
Though Bitcoin has rallied from $10,500 to $14,600 inside a month, the RSI exhibits there may be room for extra upside.
As an illustration, in December 2017, the RSI of Bitcoin surpassed 95 factors. When the RSI exceeds 75 factors, merchants begin to take into account the asset to be overbought. At present, the long-term RSI of BTC exhibits it’s underneath 70 factors.
Publish-halving cycle is materializing just like the previous
In 2017, one of many major narratives across the upsurge of Bitcoin was its halving in 2016. A block reward halving, which happens roughly each 4 years, causes the speed at which BTC is produced by miners to drop by half.
The slower manufacturing of Bitcoin results in an total drop in BTC inflows into exchanges, main the provision to drop.
The latest halving occurred in May 2020, and in 2017, Bitcoin began to rally months after the activation of the halving. The continued rally of Bitcoin goes in step with its earlier macro rallies.
Not an overheated rally, fewer sellers within the spot market
All through the previous 5 days, the funding fee of Bitcoin has stayed unfavourable on main exchanges, notably on Binance Futures. This exhibits that almost all of the futures market has been shorting BTC.
A rally is taken into account overheated when the futures funding fee begins to extend past the common fee, which is 0.01%. In current weeks, the funding fee of BTC has been hovering between -0.01% to 0.01%, exhibiting a quite impartial derivatives market.
Along with the uncrowded futures market, there are additionally fewer sellers within the spot market. Based on TensorCharts, there are some promote orders at $15,000, however no main sellers at that stage and above it.
Since there may be little resistance between $15,000 and $20,000, this raises the likelihood of hitting a brand new record-high within the coming months.
If the identical post-halving cycle as 2017 follows, then Bitcoin would theoretically attain its peak within the second quarter of 2021. If that’s the case, there’s a probability that BTC may far exceed $20,000.
The continued rally depicts an immensely robust momentum for Bitcoin as a result of miners have started to sell BTC. This exhibits the market is absorbing the promoting stress from miners.