2021 stands just 11 days away from now. The first and largest cryptocurrency, Bitcoin (BTC) on December 16 surpassed its prior all-time high of $20k. After this, the lead crypto went ahead to set a record high near $24,000. Bitcoin price has traded in a range between $22,320 and $23,280 since then.
Major Altcoins also tagged along in this recent uptrend. Litecoin, for example, is up more than 49% in the last 7 days. Over the same period, Bitcoin has grown by 27%. The historical significance of major Altcoins such as Litecoin (LTC) and Dogecoin (DOGE) is considered because when a rally begins, their momentum usually lasts longer than other lesser-known, smaller-cap Altcoins. It was noted that cryptocurrencies such as Litecoin, Dogecoin, and XRP typically rallied after Bitcoin reached an all-time high.
Guy Hirsch, managing director at the U.S eToro exchange emphasized that it is too early to call a peak for Bitcoin, as it just broke past the $20k psychological level. Bitcoin attaining fresh peaks after $23k will rub on large-cap Altcoins such as Litecoin (LTC) and Dogecoin (DOGE) as it implies that new peaks should be anticipated on these crypto assets. Historical data has shown that the two crypto assets tend to move in tandem as BTC goes through bullish and bearish cycles. Also Bitcoin breakout above $20,000 revived interest in Litecoin and Dogecoin.
Kim Dotcom, an internet entrepreneur, and digital rights activist, is enthusiastically promoting Bitcoin Cash as a medium of exchange. In a recent tweet, the entrepreneur predicted that the price of Bitcoin Cash (BCH) will rise by 867% in 2021, reaching over $3,000.
BTC/USD Daily Chart
Bitcoin presently trades at $22,963.
Where Will Bitcoin (BTC) Proceed Next?
The options market data can often provide additional relevant insights on market sentiment. Many options traders expect the Bitcoin rally to continue into 2021 as seen in strike prices between $36,000 and $50,000 in the medium term. Historically, Bitcoin rallied 12- 15 months after halving boosting the chances of a larger uptrend in early to mid-2021. Deribit users are betting on BTC reaching $100,000 through options contracts that expire on Sept. 24, 2021.
Denis Vinokourov, head of research at Bequant stated that presently the probability of a $36,000 and $52,000 strike remains low due to “trading mis-pricing and hedging” Guy Hirsch also stated that options interest indicates a rally to the mid-$30,000s could happen. Near-term bearish calls put Bitcoin at $20k. However, both expect pullbacks are likely to happen after the recent rally.
Bitcoin options total open interest. Courtesy: cryptorank.io
In this kind of scenario, Hirsch stated that Bitcoin could correct to $20,000 and $15,000. On the contrary, if selling pressure is reduced, he thinks Bitcoin could just consolidate higher. Hirsch stressed that even if a pullback occurs, the downturn will be short-lived due to a clear increase in institutional demand. He stated:
“Either we consolidate and move higher as institutions take advantage of the buying opportunity, or confidence falls and we see a drop possibly to as low as $15,000, as some including even JP Morgan have suggested.”
Typically, analysts expect corrections on BTC price, if they occur, retail investors can start buying the dip and institutional investors accumulate later.
Bitcoin has grown continuously since September, plummeting to $16,000 once in November. Asides from that, BTC hasn’t seen big pullbacks or long squeezes like it did in 2017. This leaves some analysts wondering if market dynamics have changed for Bitcoin and larger corrections are less likely.
One of the main reasons for the lack of major pullbacks is the decline in Bitcoin’s dependence on the futures market. Spot volumes are growing, fueled by rising institutional demand.
According to Hirsch, the most favorable trend for Bitcoin would be to establish a clear support zone and lower volatility, at least temporarily.
Image Credit: Cryptorank.io, Shutterstock
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