$50K Bitcoin: What Happened and What The Coming Week Will Bring?
Bitcoin (BTC) is back at $50,000 as a new week gets underway with a bang. But what pushed the flagship cryptocurrency up above that figure, and how significant is it? Staying power may see some serious tests in the coming week.
After a strong weekend, Bitcoin finally crossed the long-awaited $50,000 mark overnight on Sunday.
Bitcoin is currently priced at a touch over $50,000, the first time that the cryptocurrency has been valued above the $50,000 bracket since May of this year.
What Happened?
“The overall narrative right now is insanely bullish,” according to Jason Deane, Bitcoin analyst at Quantum Economics, noting that “There are a multitude of reasons for Bitcoin’s price action right now.”
Those reasons included “a continuation of increasing active wallet addresses and an accumulation pattern that is indicating a possible incoming supply restriction on exchanges,” according to Deane.
According to Curtis Ting, managing director at Kraken for Europe, the Middle East, and Africa, open interest for Bitcoin futures “surged upwards this morning, suggesting renewed speculation on the Bitcoin price.”
What’s more, Deane suggested that international news surrounding Bitcoin—like PayPal launching crypto services in the UK and anticipation over El Salvador’s Bitcoin law soon coming into effect—could be playing a role in Bitcoin’s increasing price.
In the last 30 days, Bitcoin’s price has increased from $33,000, representing a percentage increase of 51%. Despite that growth, it’s been a tumultuous period for Bitcoin.
Earlier this month, the U.S. Senate passed President Biden’s mammoth infrastructure bill, which included some troublesome implications for Bitcoin and the wider crypto industry. The bill’s wording appeared to expand tax requirements for non-custodial crypto actors such as miners—a move crypto advocates said could undermine crypto innovation.
The past month also saw Securities and Exchange Commission (SEC) chair Gary Gensler weigh in on Bitcoin, who described it as merely a speculative asset that doesn’t meet the requirements of actual currency.
Bitcoin mining could also have played a role in the cryptocurrency’s bounce back above $50,000.
Ever since China cracked down on the Bitcoin mining industry in June, miners have been capitalizing on a decline in competition. In fact, a report from Arcane Research recently suggested that daily Bitcoin mining revenue was up 10% in just a week, with Bitcoin miners now raking in an estimated $35 million a day.
What The Coming Week Will Bring?
Knowing the history, traders are naturally curious as to what will happen next, and even more so whether Bitcoin has bitten off more than it can chew with its latest price surge.
With the United States Federal Reserve’s annual Jackson Hole summit lined up this week, macro triggers could combine with internal sources of contention to spark a hectic week for cryptocurrency markets.
Let’s take a look at five BTC price factors worth considering in the coming days.
What Could Go Wrong?
There was no shortage of concern about Bitcoin failing to crack $50,000 this weekend.
Everything from low volumes to a bearish Wyckoff distribution event was visible on social media from those unconvinced of market strength.
In the event, however, Bitcoin clipped and held the psychologically significant price level in classic fashion.
“If btc can break out from here. People over trading will lose their Btc and hodlers will win,” popular trader Pentoshi summarized in one of their various tweets Sunday.
“I said this one other time before it did a relentless 6x. Know when to trade and when not to trade. All you have to do is do nothing. My strat is to do nothing when it happens.”
Pentoshi channeled various references to Q4 2020, hinting at similarities between market composition now and the start of the main phase of the latest Bitcoin bull run.
This “springboard” was also apparent when BTC/USD hit $50,000 for the first time in February — but it took time for the level to become firm support and provide the foundation for a trip to current all-time highs of $64,500.
As such, should BTC/USD see a fresh pullback, it will likely be fleeting, Pentoshi argues.
“Probably won’t be much looking back if any. Right now is all about accumulation. When markup begins there is only vertical accumulation.”
Macro cues will likely all come from the U.S. Fed this week. The annual Jackson Hole gathering of top financial figures, now set to be virtual, is rumored to focus extensively on economic policy changes stemming from the coronavirus pandemic.
Specifically, markets will want to know whether any tapering of asset purchases is on the cards, and when that might take place.
With such a move priced in to some extent, only something unexpected could send markets spinning, analysts suggest.
Garrett Melson, a portfolio strategist at Natixis Investment Managers Solutions, told Yahoo Finance last week
“They’re still very, very dovish. They’re slightly less dovish.
But that’s a little semantics at this point. Taper is very well documented and well known. We know it’s coming. It’s just a matter of timing and really shouldn’t surprise many investors out there.”
Stocks were already weakening at the end of last week thanks to tapering fears, with the start of trading in the U.S. yet to come at the time of writing.
Meanwhile, gold, which suffered heavily this month while Bitcoin surged, has made up for much of its recently lost ground.
Gold bugs remain convinced that the precious metal will continue to attract investment in the long term, with safe-haven seekers staying away from Bitcoin due to volatility.
China’s Impact on Bitcoin Price
If Bitcoin’s spot price action has failed to impress you, there is little debate about the strength of its network fundamentals.
The hash rate and difficulty, months into a broad recovery, outdid themselves over the past week.
Versus last Monday, the hash rate has added 8 exahashes per second (EH/s), estimates show, equating to a roughly 5% overall increase in computing power dedicated to mining.
At 121 EH/s, the hash rate is thus just 47 EH/s away from the all-time highs seen before the China mining rout took hold in May.
Documenting Bitcoin tweeted:
“Bitcoin hash rate is continuing its recovery from one of the largest infrastructure displacements in modern history—with roughly 45% of the Bitcoin mining industry, billions of dollars, relocating continents as the network on continued as normal.
Bitcoin had zero downtime.”
#Bitcoin hashrate is continuing its recovery from one of the largest infrastructure displacements in modern history—with roughly 45% of the #Bitcoin mining industry, billions of dollars, relocating continents as the network on continued as normal.#Bitcoin had ???? downtime. pic.twitter.com/7zHiyPZGT5
Not only zero downtime but zero loss of demand, with the return of hashing power has come difficulty adjustments, which have only served to strengthen network security and increase competition, all as planned.
With that, the difficulty is set to increase a third time in a row in two days’ time, this time by around 9% — a post-China high.
This is firmly bullish to the ears of those worried about long-term faith in mining profitability and likewise the role that China played in Bitcoin’s operation.
However, comparing this year’s post-halving bull run to previous ones, one commentator highlighted a potential point of concern.
ParabolicTrav noted on Sunday:
“Around 120k-138k blocks AFTER miner capitulation bottom in each bear market, bitcoin has topped out.
120k-138k blocks builds up miner inventory enough (after they hodl for a while) to crush the market with. This cycle China exodus forced inventory to market early. Implications?”
Around 120k-138k blocks AFTER miner capitulation bottom in each bear market, #bitcoin has topped out
120k-138k blocks builds up miner inventory enough (after they hodl for a while) to crush the market with
This cycle China exodus forced inventory to market early
Should the China episode have hastened the bull run this time around, a potential second price peak could likewise come earlier than many anticipate. However, theories contend that 2021 will mimic 2013 in producing a “double bubble” type of BTC price top with two peaks, the second of which coming at the end of the year or perhaps even later.
Exchange flows return to dominate
On the topic of 2020 comparisons, meanwhile, there is another trend clearly repeating last year’s bull run “springboard.”
Bitcoin exchange reserves have dropped heavily in recent weeks after China temporarily reversed the overall downtrend.
While exhibiting mixed behavior throughout 2021, investors are now withdrawing BTC in large enough quantities for those withdrawals to dominate the landscape, on-chain analytics firm Glassnode noted:
“Bitcoin exchange flows have returned to a dominance of outflows through August as investors withdraw BTC.
The market has transitioned through a number of phases of exchange flow dominance over the last year, with outflow dominance last seen in late 2020.”
#Bitcoin exchange flows have returned to a dominance of outflows through August as investors withdraw $BTC.
The market has transitioned through a number of phases of exchange flow dominance over the last year, with outflow dominance last seen in late 2020. pic.twitter.com/BQLlw06SJr
This ties in with a popular narrative focusing on accumulation at current price levels, suggesting overwhelming faith in higher prices still to come.
“Extreme greed”
“Extreme” emotions are back in the picture among crypto investors.
That’s according to the Crypto Fear & Greed Index, which this week is firmly within its “extreme greed” zone.
While not quite at the top of its 0–100 scale, the Index now measures 79/100, just 15 points away from typically bullish peaks, which preclude major price corrections.
The pace of change in Fear & Greed has been intense — just three weeks ago, it measured 42/100, denoting “fear” as the overall market emotion.
Monday’s reading is thus the highest since mid-April, when Bitcoin was at its current all-time highs.
