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Crypto Chartbook: Bitcoin - Grab It While You Can

Apr. 08, 2021 11:11 AM ETBitcoin USD (BTC-USD)GBTC75 Comments
Florian Grummes profile picture
Florian Grummes
4.73K Followers

Summary

  • What makes Bitcoin unique right now is its supply/demand imbalance.
  • What has changed over the years is the substructure of moves within smaller time frames.
  • The fundamental reason for these price explosions is hoarding. One aspect is HODLers. Another aspect is the limited amount of Bitcoin.

We are incredibly bullish on Bitcoin (BTC-USD) and find two dominant reasons why we are this confident. We examine each asset from a fundamental and from a chart perspective to extract our forecast. What makes Bitcoin unique right now is its supply/demand imbalance. An imbalance not temporary but principle based. In addition, a chart phenomenon that supports Bitcoin's unique history becomes more and more evident.

BTC-USD, Monthly Chart, Accelerated moves:

Bitcoin in US Dollar, monthly chart as of April 5th, 2021.

Looking at the logarithmic monthly chart of Bitcoin above, you can see Bitcoin's unique trading behavior. Each of the five thrusts in the last ten years were unique in their structure. After a brief steep decline (red) follows a strong bounce to the break-even point (yellow). This consistent strength in itself is notable. Truly remarkable is what comes after. Prices accelerate substantially further up (turquoise). It is these boost moves in their consistency that we have not seen in any other instrument. It makes Bitcoin unique and creates an edge for the trader as well as the investor.

BTC-USD, Weekly Chart, Favorable abnormalities:

Bitcoin in US Dollar, weekly chart as of April 5th, 2021.

What has changed over the years is the substructure of moves within smaller time frames. The weekly chart above shows clearly how retracements are very flat within the last twelve months. Supply-demand imbalances are widening since the number of coins free in the markets for speculation and trade is shrinking due to corporate hoarding of coins. Larger size offers are quickly gobbled up, which leads to small percentage retracements. This lines up with our fundamental findings observing exchange and corporate Bitcoin wallets.

BTC-USD, Daily Chart, Exploiting stacked edges:

Bitcoin in US Dollar, daily chart as of April 5th, 2021.

This stacking of odds both fundamentally

This article was written by

Florian Grummes profile picture
4.73K Followers
Florian Grummes is an independent financial analyst, advisor, consultant, trader & investor as well as an international speaker with more than 25 years of experience in financial markets. Via Midas Touch Consulting he is publishing weekly gold, silver, bitcoin & cryptocurrency analysis for his numerous international readers. Florian is well known for combining technical, fundamental and sentiment analysis into one often accurate conclusion about the markets. www.midastouch-consulting.com

Analystโ€™s Disclosure: I am/we are long BTC-USD.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (75)

g
I think BTC is hitting a design flaw and it will show why in nature nothing is static. Even Gold which has been considered the king of assets since the beginning of time has a constant but limited (not fixed) supply. Fixed supply, imo, is a serious design flaw.

For the Bitcoin price to go more people need to buy at these levels. For people to buy people need to sell but as we are observing more and more people are hoarding the asset as most people are realizing hoarding is the only use case for Bitcoin.

As more and more people hoard the liquidity dries up on the exchanges and the volume goes down. Along with the volume interest begins to go down. Bitcoin will only go up as long as interest is high since it has no other use case.

Given those fundamentals I think Bitcoin is a strong sell at these level. If it doesn't get hacked or destroyed in the near future ill look into buying at around 3K.
HamishMacEwan profile picture
@gold_seeker wrote: "I'll look into buying at around 3K"

So you have no objection to bitcoin beyond the price.

I've notice the use of "hoard," with its selfish, negative connotations, in preference to "save," which is what they are doing in fact. Smear away, it's all you've got.
jimbo162 profile picture
@HamishMacEwan $3000 seems like much more than zero. His narrative changes with the wind.
S
Bitcoin can go to 100k or 200k easy as long as the tether bank prints more tethers and the exchanges pretend that tethers (which they get at a 90% discount) are equivalent to dollars. 3 billion tethers printed from 4/1/2021 to 4/7/2021. They just printed 300 billion in the last 6 hours.
I
@Shane Martinez yes holding large sums in USDT is scary. Personally if I wanted to hold large sums in stable-coins I would scatter it around between USDT, DAI, binance USD and more to minimize the risk.
S
@Investinyourself62 The problem with tethers is that if they are issued unbacked and used to buy up cryptocurrency at spot, it would mean that much of the price discovery for the recent bullrun in crypto currency was due to fraud and not legitimate demand. And that a shady group of people have managed to gather for themselves a huge percentage of the supply of bitcoins by operating a fraudulent money printing scam.

But who knows how or when it will end. Maybe they get away with it or maybe people start talking about how tether is printing 4 billion a week on the news.
An entire generation's growing up with negative/0 interest rates.
For them BTC is a bank.
R
Here they come ๐Ÿ’Ž
I
The fact that there are still so many sceptics makes me feel good i.e. I am still early!
B
This is a Bitcoin's Bubble, I don't have to worry about exposure to "Bubble POP" and it is impossible for me to say, "It is safe to get in now?" Like all "Bubble", this could be the next "AI Turnip Crash" and Fidelity promoted "Bitcoin ETF" and I guess Fidelity wants to be a leader to "To Manipulate and Suffocate Bitcoin and because Fidelity don't want Bitcoin take all Fidelity business. Is that right Fidelity?
j
Your charts are telling me it should drop to around 10,000 or so, and that it has topped out for some time.
Jethroe1 profile picture
Glassnode has recently released a newsletter on their blockchain analysis, and I will say that their actual charts back up this article. I do not trust, but verify, and I can say without any reservation whatsoever that Bitcoin is moving off exchanges at a record rate. Keep in mind, although not mentioned here, of the 18.6 million Bitcoin, approximately 20% are considered lost, and that more importantly, as of about 2 months ago, only 4 million Bitcoin were actually liquid and available for exchange. There has been such an incredible movement off exchange and into storage in the last 60 days, that I have no idea how much liquidity is left. What is holding back a breakout above $60k is a sell wall at that price point with very leveraged long positions, and a further funded short side just in the mid $50's. The Fibonacci curve shows Bitcoin at minimum volatility, and a breakout is imminent, in my opinion. That breakout could go either way, but right now the path of least resistance is up.
g
@Jethroe1 What happens when all the Bitcoin is no longer on exchanges? No one wants to sell anymore. There is no trading going on. It's not really used for any real purpose. The velocity of this particular asset class will go to zero which sounds incredibly bearish to me. We can see that with the declining volume on the exchanges and reduced interest in the asset class. How long can the Twitter pumpers keep pumping Bitcoin with their grandiose predictions? It works until it doesn't.
HamishMacEwan profile picture
@gold_seeker asks "What happens when all the Bitcoin is no longer on exchanges?"

All? What an amazing consistency in human behaviour that would reveal. Everyone holding one asset, noone selling. Amazing.

When bitcoin is $1,000,000 there'll be bitcoin on the exchanges.
Jethroe1 profile picture
@HamishMacEwan I don't see Gold Seeker any more, muted him. Some people are just "challenged" in their critical thinking.
z
Grab it while you can: This is the truth, nothing but the truth.
Bitcoin mining nobody will die whereas gold mining cost lives. This case those greenies or environmentalists should love Bitcoins?
A
Can we please stop with the "pyramid scheme" comments already? The concept of buying something today with the expectation of selling it at a higher price later is not a pyramid scheme; it's the foundation of the entire western financial system. If BTC is a pyramid scheme, then literally every investment is a pyramid scheme as well, from bonds to stocks...and most especially commodities.

If you subscribe to this view, your IRA and 401k are both ticking timebombs! Better sell everything and stuff those greenbacks under the mattress! I'm sure they'll become more valuable once we round the bases on $30T in debt!

It's reasonable to argue that BTC is expensive at these levels. It's just plain stupid to scream "pYrAmId ScHeMe" and "iNtRiNsIc VaLuE" at the top of your lungs like repeating it enough times will make you less wrong.
k
@Aaron173 Well said. But there is a difference: if you own a stock or a house and others decide they don't want to buy it from you, you still have a place to sleep or a rent or a dividend to collect. The closest parallels to bitcoin are government fiat money and gold. Like BTC, they do not yield anything. If others decide they don't want your gold, you can at most make jewelry out of it. If others decide they don't want your dollars or BTC, you're out of luck completely. The question is whether this is more likely to happen with dollars or with BTC. With the dollar, the risk comes in the form of (hyper)inflation. With BTC, the risk comes in the form of decay in acceptance rate. My pick is to hold neither the dollars (Euros, etc.) nor BTC. Instead, my preference is to hold yielding assets.
@klm123 Or people could just invest without feelings, only by pure logic focused on ROI, in that case everyone would hold some BTC.
jimbo162 profile picture
@klm123 hold "yielding assets" great idea. A quick review in my exodus wallet shows current yields of ADA 4.21%, ALGO 5.65%, ATOM 9.86%, XTZ 5.49% APY. All pay these returns in additional coins that appreciate at even higher rates. My pick is to buy, then hold these assets and collect fat dividends every couple weeks. What a world. Thanks for the idea.
High Yield FIREVestor profile picture
Thank you, brother for composing one of the best articles on btc. You are my hero. Long BTC๐Ÿš€๐Ÿš€๐Ÿš€๐Ÿš€๐Ÿš€
D
I know I have skin in the game, but wow it sure would be something to see BTC in 6 figures. Of course this all stops when nation-states begin releasing their own bespoke digital currency.....but in the meantime, if you've been around the investing block for several decades, and seen things come and go since Dickie left office, this digital currency stuff is just flat out interesting and fun with the right amount of danger swirling around it.

The best of fortune to us all
@D. Rider You state "f course this all stops when nation-states begin releasing their own bespoke digital currency" Do you mean that you believe governments will make Bitcoin illegal and Bitcoin will crash to zero at that point?
D
@Cedrick

No, not to zero. We most likely won't see that ever. Just the enthusiasm for it will be dented, and when enthusiasm wanes for any asset, slowly over time so does the propensity to own it. Ironically we are probably going to see our first fully backed nation-state currency sooner than anyone thought. Ole' Singapore is real close, and I'd be truly surprised if it is not released by late winter and/or next spring.

And that will open the floodgates. Over the next few years afterwards, where one has now ventured, many, many more will follow. At that point, haha, I may actually entertain owning (physically) gold, silver and other PMs once again.

Until then, let's root for BTC to six figures! Would be something to see and say we were alive when it happened.

All the best!
S
@D. Rider Government run "bespoke digital currencies" have absolutely nothing in common with decentralized Bitcoin... They only make "printing" more easier....
BLIN8089 profile picture
It is a fallacy that scarcity will drive demand. The current driver is mostly fear is FOMO and in the hypothesis that there are people who will always pay a higher and higher price. It is essentially assuming an eternal pyramid scheme. The only things that are essential to sustain lives, such as air, water, and food, would drive people to pay whatever they could afford when they become really scarce. If Bitcoin could become a viable substitute for Gold, wouldn't there be other "digital asset" could emerge as a viable substitute as well? It is not a means of payment that people have to procure to conduct transactions such as paying taxes or fulfill debt obligations.

The original thesis from Satoshi Nakamoto for Bitcoin is in its value for exchange -- a system for peer-to-peer payment without "trusted" financial intermediaries. The current development is an antithesis of its creation. None of the cryptocurrencies have any meaningful usage and circulation in real economies and their activities are most in trading on a few centralized "trusted" exchanges and custodians. They are now just other forms of speculative synthetic digital commodities for speculation. The uptrend will stop and might turn at some point. But yes, no one knows at what point.
r
@BLIN8089 a stock ticker that pays no dividends has the hypothesis that someone will always pay a higher and higher price.
P
@BLIN8089 I think Satoshi's original thesis as a useful exchange mechanism is outdated now
Nathan Gallo profile picture
@BLIN8089 "None of the cryptocurrencies have any meaningful usage and circulation in real economies and their activities are most in trading on a few centralized "trusted" exchanges and custodians."

None of bitcoins peer to peer uses have gone away, you're complaining that you don't like how people are using it. Bitcoin is completely free, people can use it how they wish
Be kind, Be wise, Be wealthy profile picture
Whatโ€™s the best way to buy bitcoin right now?
Cattywampus profile picture
@aubiepolo buy $GBTC if you want it in an IRA. Otherwise just buy it on Coinbase or something like that. I own all my exposure through $GBTC.
t
@aubiepolo gemini.
A
Bitcoins are on fire sale right now! ๐Ÿ”ฅ๐Ÿ”ฅ๐Ÿ”ฅ
Seeking AIpha profile picture
@AlexanderWilhelm Everyone seems bullish on Bitcoin ๐Ÿค”
A
@proterrificmastertrader Iโ€™m only bullish while prices remain low. Once bitcoin is fairly valued at a few million USD per coin I will start unloading all of my crypto positions
Seeking AIpha profile picture
@AlexanderWilhelm Nothing is fair in love and war...and especially Bitcoin ๐Ÿ˜‚
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