How sustainable is the Bitcoin rally?


Bitcoin, at the time of writing, was costing just under $ 40,000. In fact, just over 48 hours ago, the world’s largest cryptocurrency was below $ 42,000.

Let it sink in – $ 42,000! Just over a month ago, the cryptocurrency was valued at $ 18,500, with the overriding question on people’s minds being: will Bitcoin be able to breach its ATH 2017 and hold out for long? above that range? In the month that followed, BTC jumped over 120% on the charts. It goes without saying that this question has been answered in the affirmative in the strongest possible way.

Now, the growing entry of institutions and Bitcoin’s growing reputation as a hedge in times of political and economic uncertainties may have been a big contributor to this rally, but the scale of it has given rise to another question. relevant: how sustainable is this rally?

The key word here is “sustainable”. Surely Bitcoin can’t keep going north like this, can it? After all, even many in the crypto community are skeptical. Anthony Pompliano of Morgan Creek Digital, for example, with the executive who recently said he wouldn’t be surprised if the cryptocurrency saw a 20% to 30% drop in the near future.

Even JP Morgan, one of the world’s most reputable investment banks, recently noted that, if so, Bitcoin could climb to the $ 50,000 to $ 100,000 range, that would not be viable, especially more than there are already signs of “speculative mania”.

Interestingly, a key metric also seems to highlight the likelihood of unsustainability. As Messari’s Ryan Selkis pointed out, CaseBitcoin’s doubling time metric (the days it takes BTC to double from the previous threshold) showed unfavorable multi-year lows this week.

Source: CaseBitcoin

As the attached chart shows, doubling times have consistently dropped whenever Bitcoin has noted a higher price. This is also the case now, with the doubling time at low levels for several years. That’s good news, isn’t it? Well, yes, but if history is any proof, these lows were often followed by big sales in the market. This is what happened in April and November 2013, as well as in December 2017.

Ergo, there’s a good chance the sales people were expecting can finally surface now. And, while that may sound like bad news, as Selkis was quick to point out, many “of those who have been around for a few Bitcoin cycles are counterintuitively hoping for a pullback and a period of consolidation right now.” A respite, they believe, even if it involves sales, won’t necessarily be that bad.

However, hold onto your horses. While the aforementioned metric and JP Morgan may argue that sales are coming and the current rally is not sustainable, it should be noted that there are many other metrics that suggest there are more benefits to be filled by cryptocurrency.

Consider only these two – the entity-adjusted dormancy rate and the NVT report.

The first, just yesterday, reached a crucial bullish threshold. According to Glassnode,

“He [Entity-adjusted Dormancy Flow] can be used to time market lows and assess whether the bull market remains under relatively normal conditions. This helps to confirm whether Bitcoin is in a primary bullish or bearish trend. “

Put simply, the metric seems to suggest that the bull market has finally started. In addition, thanks to the momentum of the Bitcoin market, it would appear that it will no longer be a touch activity, as it was in July 2019.

Now let’s look at the NVT ratio. As Stack Funds pointed out in its January 7 newsletter, Bitcoin’s NVT 30d is trading between 65 and 70. What does that mean? Well, that means that despite the exponential nature of Bitcoin’s rise, it is not overvalued, and since it is not yet overvalued, the question of the sustainability of the price rally does not arise either. In fact, the reading suggests that there is more room for the upside on the charts.

However, these are not the only measurements indicating the same thing. According to Qiao Wang, with most long-term hodlers reluctant to sell their Bitcoin at this price point, a 2013-style double bubble seems likely. Ergo, even if there are sales, despite regulatory shocks, buying FOMO whales and dip will likely keep cryptocurrency trading strong.

Non-sustainability often means that a rally does not have a solid foundation. This is not the case with Bitcoin since its rally is based on years of solid fundamentals. While the magnitude of his hike seems unreal, the measurements seem to suggest that a benefit is possible.

This does not mean that the market will not see any correction. It certainly will be. But, what it does mean is that if you worry about an accident after the “unbearable” rally, it won’t happen. In fact, it is estimated that over 90% of hypothetical withdrawals will not see Bitcoin fall below $ 22,000.

Simply put, BTC might never touch its 2017-ATH again. Not bad for a rally deemed unsustainable by some, eh?

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