5 things to watch in Bitcoin this week


Bitcoin (BTC) starts another week at near all-time highs as the US dollar continues to decline – what’s next?As investors seek safe havens and Bitcoin is already experiencing tightening demand, Cointelegraph is covering factors that could influence price action further this week.

DXY descends to familiar lows

News from the United States that mass vaccination against the coronavirus could begin in a month has panicked investors for cover assets.

With several candidates now available among potential vaccines, the mood is tending for the emergence of a global recovery, meaning the dollar is becoming less attractive compared to other destinations.

“The vaccine news promotes the idea of ​​a global economic recovery sooner or later, with the dollar losing its safe-haven appeal along the way,” Rodrigo Catril, currency strategist at National Australia Bank, told Bloomberg.

“This is a backdrop of positive and negative risk for the US dollar, especially with the Fed likely to remain ultra-dovish for some time. “

The US Dollar Currency Index (DXY), which tracks the USD against a basket of twenty trading partner currencies, has fallen twice since August, with monthly losses totaling nearly 2.2%.

As Cointelegraph often reports, DXY tends to show an inverse correlation with Bitcoin, which means that prolonged weakness goes hand in hand with stronger BTC / USD performance.

3 month US dollar currency index chart. Source: TradingView

The outlook for the dollar remains uncertain thanks also to the risk of further White House sanctions against Chinese tech companies, details of which are expected this week.

Supply Squeeze “The Greatest Bitcoin Story”

Within Bitcoin, the emerging narrative that buyers simply demand more coins than what can be produced continues.

As previously stated, this is driven by corporate entities including Grayscale, Square’s Cash App, and PayPal, with the requirements of all three only increasing over time as more customers choose to buy BTC.

The result is that miners see their block grants take over, and the only way buyers can close the gap is to pay higher prices per part.

“PayPal and Cash App already buy over 100% of all newly issued bitcoin,” investment firm Pantera Capital summarized in a blog post on November 21.

“Where would Cash App get its coins?” This is where the finite supply and inelasticity part comes in: at a higher price. This is the history of Bitcoin right now. “

Pantera has included a volume chart from ItBit, the exchange run by Paxos, the payment manager covering PayPal’s new cryptocurrency functionality. PayPal alone, he added, already appears to buy 70% of all newly mined bitcoin.

ItBit volume chart. Source: Pantera Capital

The new status quo differs significantly from the last time Bitcoin was traded at levels near $ 20,000. Contrary to this, various figures claim, those who buy this time around are by definition there for the long term.

“At $ 18.5K #Bitcoin, Google searches for ‘bitcoin’ have not seen an increase. This is not a FOMO rally. They are stable hands. Not many people understand this ”, co-founder of Gemini Exchange Cameron Winklevoss tweeted on Monday.

Comments from a traditional market strategist last week highlighted the apparent lack of interest in Bitcoin from mainstream consumers. That, she told Bloomberg, had passed away in 2017.

Fundamentals mark a serious rebound

After rising 4.82% last week, Bitcoin’s network difficulty is expected to lead to a resurgence in fundamentals in five days.

Difficulty and its automatic readjustments – after each block in 2016 – is a key feature of Bitcoin that allows it to maintain constant block mining intervals without outside intervention and thus ensure network stability.

At the start of November, the difficulty dropped the most in nine years in a single readjustment. This created a more accessible playground for miners, with the hope that increased activity would escalate the difficulty through the competition that ensued.

As such, by the end of this week, difficulty is expected to rebound to around 7.7%, nearly reversing the impact of the previous drop and setting the stage for new all-time highs.

Likewise, Bitcoin’s average hash rate – the estimated computing power dedicated to validating transactions – hit 137 exhashes per second (EH / s), rebounding 30% since the difficulty drop.

The all-time high of the seven-day average hash rate currently stands at 146 pe / s, which appears in mid-October.

Graph of the average Bitcoin hash rate over 7 days over 2 months. Source: Blockchain

PlanB: big price gains are yet to come

Zooming out – albeit slightly – is still a major cause of hatred among some of Bitcoin’s best-known analysts.

For Plan B, creator of the stock-flow-based price prediction model series, Bitcoin’s real advantage is yet to come, despite monthly gains that already total 43%.

This is due to historical behavior after the events of halving global grants. In 2012 and 2016, a surge occurred months after the halving, but big gains came the following year – and looked more like a tsunami than a slowly rising tide.

“The current #bitcoin price action is nice, but we’re expecting a real jump (like the red arrows in early 2013 and 2017),” he tweeted alongside an annotated chart.

“IMO which will be the start of the real bull market, and in fact phase5. January 2021? “

As Cointelegraph reported, PlanB is far from alone in seeing next year as the return of the Bitcoin dream days.

Bitcoin price performance with halves highlighted. Source: PlanB

Fear and greed slowly cool down

A worrying counter-argument to continued gains for Bitcoin last week came in the form of disturbing readings from the Crypto Fear & Greed Index.

Using a basket of factors to measure investor sentiment, the index nearly matched the highs of 2019, resulting in a significant price drop.

As of Monday, however, the current “extreme greed” rating of the market sentiment measure slowly begins to decline from 94/100 to 90/100.

Indice Crypto Fear & Greed. Source: Alternative.me

“Extreme greed” refers to the sharp deterioration in investor resolve rapidly as prices rise, indicating the increasing likelihood of a sale.


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