After a massive investment in BTC, Tesla has once again received a lot of attention. Its CEO Elon Musk has long been known as a fan of innovations and cryptocurrencies as well.
Previously, he even declared himself the «CEO of Dogecoin», and recently has given this altcoin a lot of attention on his Twitter. Be that as it may, against the backdrop of everything that is happening now, analysts are expecting a serious leap from Bitcoin.
Bitcoin price reacted positively to Elon’s actions and recently set a new all-time high. Now it is $ 48,687, and the record was set on February 12th. Here is a graph of the cryptocurrency rate for the last week.
Bitcoin price chart for the last week
Against the background of its growth, many altcoins are also constantly updating their highs in dollar terms. However, this is only the beginning of a new phase of the growth trend for the entire coin market. The experts of the DecenTrader platform summed up the latest events and explained why it is now more profitable to be on the side of the bulls – that is, to bet on the continued growth of the industry – as never before.
Reason # 1: falling liquidity of bitcoins
As the demand for Bitcoin has grown, the liquidity of the coins has decreased significantly in recent times. This means that there is less asset in the market that can easily change hands. Many coins are kept in cold wallets for a long time, that is, their owners are not eager to sell BTC anytime soon.
The chart below shows the price of Bitcoin against the backdrop of a liquid and highly liquid volume of coins. Since July 2020, the last two metrics have begun to decline, which means that there are fewer coins available for trading.
The volume of liquid and highly liquid bitcoins against the background of the cryptocurrency price
The process of accumulating BTC by large and medium holders began back then. Recall that it was at the end of last summer that MicroStrategy made a big investment in Bitcoin and started a new trend on Wall Street: now other organizations are joining the explosive growth of the crypto market.
Reason # 2: growing demand for cryptocurrency
As the main cryptocurrency is limited to 21 million units, we continue to see big players rushing to the market who don’t want to be left behind. The number of wallets holding over 1,000 BTC has continued to grow rapidly over the past two months. Most likely, many of them are owned by both Tesla and family offices and other large institutions.
Number of coins on large wallets
Most interestingly, the number of wallets with a relatively small amount of bitcoins – up to 10 BTC – shows the opposite trend. That is, the big market players are getting richer, while individual traders and investors continue to get poorer. Or they sell bitcoins to free up funds to trade altcoins on the Ethereum network.
However, this law is often observed in other markets as well. Big players have more experience and opportunities to manipulate the price of BTC, but amateurs do not. Many of them are only losing money after investing in Bitcoin, and this trend is unlikely to end.
Reason # 3: the market has not yet reached its peak
The so-called RHODL Ratio is a special indicator that has successfully displayed the major peaks of each market cycle for Bitcoin in the past. It uses HODL realized value waves, which represent the different age groups of the UTXO coins, which are then weighted by the realized coin values in each area of the chart.
If this seems too complicated for you, just follow the blue line in the screenshot below. When it reaches the upper red zone, it will be possible to draw conclusions about the «overheating of the market». In the meantime, this is not even close.
RHODL Ratio indicator
Currently, we still have some way to go before we enter the red zone, which will signal an overbought BTC and a readiness for a market crash.
What will happen to the cryptocurrency market in the short term?
The MVRV Z-Score indicator is better suited for identifying the immediate major highs as well as the highs of the final market cycle. He looks for extremes in the differences between market value and realized value at any given time. The principle of operation of the schedule is the same as for the already mentioned RHODL Ratio.
MVRV Z-Score indicator
According to the indications of conditional Fibonacci levels – a special indicator that estimates possible market heights in accordance with the multipliers of a famous mathematician – on the Bitcoin chart, the two nearest growth targets are set on the lines of 54 thousand and 72 thousand dollars. If, instead of a new wave, another correction occurs, analysts at DecenTrader believe that a fall to $ 38,000 is possible.
It is important to note here that all such forecasts are based on information from the past. That is, experts are looking for similar situations that have already occurred, and are trying to project the behavior of traders into the future. Naturally, there are no guarantees regarding the achievement of the mentioned price levels, and there cannot be, therefore, no treat these analyst statements as financial advice.
Fibonacci levels to be guided by in case of cryptocurrency growth
In general, even if we discard all such predictions, it becomes obvious that while the market is «bullish» – that is, playing against the growth of Bitcoin and other cryptocurrencies is quite dangerous. Even the readings of the indicators do not mean that the asset price will definitely reverse in the aforementioned zones. On the next wave of hype, Bitcoin may well jump to $ 100 thousand, that is, even such a scenario cannot be completely written off.
We believe that the market is indeed on the verge of another major growth stage. Let’s hope that it will last long enough, but there will be enough profit for everyone.