Bitcoin Mid- to Long-term analysis + Short-term bearish swing.

TechNerdOmar Updated   
Bitcoin ( BTCUSD ) has been one of the trickiest assets to forecast, until institutions hopped on, and now it's THE trickiest asset to forecast. So I will give my take on it and the factors I'm considering for my mid to long term analysis. I also give a short-term forecast. But since that can change very quickly, keep following this idea for updates.
I would like to thank my followers. In less than a month, I went from 4 to 50 followers, and I hope I can provide you quality analysis and discussions. Thanks to all of you.

First I will point out that I am bullish on Bitcoin long-term. I believe it can easily touch $200k during this year. I am, however, expecting a correction of about 50% to 60% from the all-time-high in the short-term. Just the usual Bitcoin behaviour, nothing big. The chart shows a possible scenario that looks neat on my chart. Bitcoin, however, has its own way of looking neat. The path I drew is too long to be accurate, so don't take it as a strict guide, but rather to help you identify points of support and reversal. Now let's get to the analysis.

One new factor that was absent from the Bitcoin space is institutions, government and regulatory bodies that have recently joined in on the action. Paypal, Square and others are buying big amounts of Bitcoin. The SEC just started prosecuting Ripple, finally! And Tether keeps creating virtual currency, perhaps trying to compete with the Federal Reserve. Anyway, let's dive into each of these:

  • Paypal started selling Bitcoin in Oct 2020 to customers in the US. And they are planning to expand internationally soon.
  • Paypal does not allow withdrawal of Bitcoin from their system. You can only buy, keep it there, and sell.
  • Paypal will keep buying Bitcoin as long as they are anticipating demand from their customers. Similarly, they will sell their Bitcoin when customers are selling. They are not interested in taking a position in Bitcoin, neither short nor long.
  • Paypal have to buy and sell over the counter (OTC), and probably in large chunks. That activity does not reflect on the open markets except after a delay. That is called delayed price discovery. Suppose that Paypal bought a large chunk. Then, open markets would suddenly discover after a while that that large chunk of Bitcoin has been removed from circulation. This leads to a sudden spike in price. Likewise, when Paypal sells, some while later, a big sudden plunge occurs. That is how delayed price discovery causes volatility.
  • This demand from customers can be hard to anticipate and can go out of control, especially after Paypal expands its Bitcoin offering internationally. This mean that Paypal will find themselves forced to take a position in Bitcoin. They will have to bet on one direction or the other. Paypal would certainly not like volatility in their balance sheets.
  • They could choose to suspend the service at any time which will create more volatility.
  • They could choose to convert customers' balances from bitcoins to USD at any time and either keep the bitcoin for themselves or sell all of it, creating a huge move in the market, depending on their decision. Keeping it might not necessarily mean it goes up.
In short: Paypal will create volatility in Bitcoin, as if that's what we've been missing!

  • Almost all Bitcoin gateways are asking for KYC, even individual sellers do, and they even proof of ownership of the Bitcoin wallet. Coinbase already blew any hope of protecting your privacy. They would simply give away information to government whenever requested. It's becoming harder and harder to keep your ownership of Bitcoin private.
  • Paypal not allowing Bitcoin withdrawals is also regulation, and I suspect that it either stems out of Paypal trying to adhere to existing government policy or it is a smart move by Paypal to attract government cooperation and support. The reason I say this is.. imagine this: People can now buy Bitcoin. They can fulfil their curiosity, their investment desires, but at the same time, they cannot withdraw Bitcoins out of the Paypal system. This means that control is in the hands of Paypal. The government would love that. Everything is monitored. No more threats of money laundering, black market trades or siphoning funds to unwanted parties.
  • All of this will keep Bitcoin long-time hodlers to keep hodling. The increase of regulation and the restriction of freedom simply creates incentives for hodling and buying, not selling.
In short: Regulation adds value and demand to Bitcoin, not the opposite.

  • Tether have always been under suspicion of minting more of their virtual currency without real USD cover. They were subpoenaed before and they are always in danger of an SEC crackdown.
  • If an SEC crackdown or any kind of government legal action does occur, the value of Tether currency will fall to the ground. Why? Because people will be selling. And how do you sell Tether? There is no other way except buying Bitcoin or some altcoin with your Tether, which means that all the market cap of Tether will move towards the crypto market, and mostly to Bitcoin of course.
In short: Tether crashing will cause a huge rise in the price of Bitcoin, not a crash.

Summary of Fundamental Analysis:
  • Bitcoin will remain volatile even after adoption by institutions.
  • Bitcoin is long-term going up, not down.

The Short-term Bearish Swing:
  • I expect Bitcoin to retest the Dec 2017 high of around $20k. The sooner it happens the better, because we won't need to worry about it afterwards.
  • I've drawn a path that delineates one point of resistance and three points of support. I drew it a few hours ago when Bitcoin was still at $34870. So far, it has gone up following my path. I know that doesn't count, but if the rest of the path doesn't work, then I hope I can get credit for the first few hours of it XD. Keep watching my updates on this idea as I adjust my short-term view as Bitcoin proves me wrong short-term. And let's hope in the next few hours, it does respect my resistance point.
  • What I'm sure of is that Bitcoin will be volatile, there will be many false breakouts and bull traps, and that $20k is not too low for it to hit in the coming month.
  • What you should do in this case is buy the dips and hold. There are two methods of setting up orders on expected points of support. Say we have three points of support where we expect to catch a dip. The first method is equal division, i.e. to divide the capital you are willing to invest into three equal portions, and buy with each portion as price hits your dip target. The second method, which I favor, is bigger orders as you go lower. This way, you don't miss a buy if it turns out that a higher support was the reversal point, and at the same time, if it does reach your expected bottom, then your average buying price is affected the most by the bottommost buy lowering it more than when using the first method.

Summary: Dollar-cost-average, Hodl, and stay safe :)

The first arc is playing out. But notice the red triangle. If it holds the price, then we might have a chance to get a bullish break out of the triangle towards the upper target. Otherwise, the second arc may starting playing out.

Nice... Triangle did hold the price. There is hope!

Too bad. Triangle did not break upwards. It looks like more side movement but let's hope it doesn't follow the rest of the path I drew.

This possibility doesn't look too absurd now.

This is also possible but not likely in my opinion.
Wow Bitcoin's rally came much sooner than I expected. We broke this resistance line, so if the day closes solid green and the next day is still going up, then I see the target >50k to the next resistance line easily achievable.

The trend line pointed to in the chart was resistance and is not support.


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