The calm earlier than the storm? Based on the analyst, $ 20,000 bitcoin is feasible in three months
The price of Bitcoin (BTC) has been consolidating in a narrow range for several months. If the top cryptocurrency breaks out successfully, Bitazu Capital founding partner Mohit Sorout says a record high is imminent.
As of July 2020, Bitcoin has been trading between $ 10,200 and $ 11,800, a range of 15%. Volatility has been subdued for an extended period of time, with the exception of a few brief instances of volatility spikes.
Typically, when Bitcoin remains stable in a narrow price range for a long time, a large price movement occurs.
Whether or not an outbreak would occur in the short term remains uncertain. But if it does, Sorout says it would take three months for BTC to hit $ 20,000.
The daily bitcoin chart with a trend line. Source: TradingView.com, Mohit Sorout
Why three months for a Bitcoin all-time high after a breakout?
Based on previous price cycles, Bitcoin tends to move quickly after a long range. The pattern historically employed both breakouts and failures.
From May 1 to July 20, Bitcoin was between $ 8,800 and $ 9,800 and stabilized at around $ 9,100. After two months of consolidation, it took BTC 12 days to rally 32% to $ 12,123 on Binance.
Given Bitcoin’s tendency to see large spikes in volatility after lengthy consolidation periods, Sorout said:
“The calm before the storm. If $ BTC broke out today, it would most likely hit its previous ATH of $ 20,000 within 3 months.”
When asked about the reasons for the three month range, Sorout said it was based on an observation of volatility.
According to Sorout, a price increase towards USD 20,000 could take place three months ago. He noticed:
“An observation based on how violent rallies are after periods of subdued volatility. Might even be earlier. “
An important variable to be pinpointed is the decline in open positions in futures compared to previous bull markets.
In particular, following the charges brought by the US Commodities and Futures Trading Commission or the CFTC against BitMEX, the open positions for futures have decreased overall. This could result in a more stable and gradual uptrend for Bitcoin, unlike previous bull cycles.
BitMEX open interest since the beginning of the year. Source: btctools.io
Factors that could add momentum to BTC in the fourth quarter and throughout 2021
A strong portrayal of a Bitcoin bull cycle in 2021 remains the recent surge in institutional demand.
On October 17, Barry Silbert, CEO of Grayscale, said the company had a record $ 6.4 billion in assets under management. Silbert pointed out that the company saw “large inflows this week”.
Institutions that have acquired bitcoin, such as Square and MicroStrategy, said they viewed bitcoin as a potential treasury asset. If so, it could mean that many institutional investors are accumulating BTC with no intention of selling in the near future.
The S2F model with its latest update. Source: PlanB
Bitcoin price stagnated relatively positively throughout October despite positive news about institutional inflows. However, according to the stock-to-flow builder (S2F) PlanB, asymmetrical returns are likely to appear over time. He stated:
“Why is the #bitcoin price not increasing with all these institutional purchases? Who sells? The BTC price is right where it should be. He’s holding over $ 10,000 waiting for that one moment. Asymmetrical returns. Patience! “