All Seems to Be Bullish for Bitcoin, but One Thing Requires You to Be Cautious
In the short term at least.
|Sylvain Saurel||Nov 12|| 5|
Bitcoin fundamentals have continued to strengthen in recent weeks. Since Bitcoin's third Halving, which took place on May 11, 2020, everything has been slowly but surely put in place for the post-Halving Bull Run that everyone is eagerly awaiting.
The positive news has been steadily building up over the last few months.
Mentalities have changed radically towards Bitcoin in just a few months
One after the other, institutional investors are choosing Bitcoin over gold as a hedge against the great monetary inflation that we are currently experiencing. Paul Tudor Jones was the first to take a public stand in favor of Bitcoin at the beginning of May 2020.
He has been joined by a significant number of legendary Wall Street investors since then.
In a few months, all that will be missing is Warren Buffett. The Oracle of Omaha continues to lock himself into his hostile attitude towards Bitcoin, which he still calls “Rat poison squared”. The change in mentality therefore still does not seem to be of relevance to Warren Buffett regarding Bitcoin.
At the corporate level, MicroStrategy led the way in early August 2020 by making Bitcoin its primary treasury reserve asset. Michael J. Saylor, MicroStrategy’s CEO, has since become a Bitcoin Maximalist and a voice that matters in the Bitcoin world.
MicroStrategy owns a total of 38,250 BTC acquired for $425 million. As the Bitcoin price reaches $15.3K, MicroStrategy’s investment is now worth $585 million. That’s quite an impressive performance in just two months.
Square, whose CEO is none other than Jack Dorsey, made the same choice by investing $50 million in Bitcoin in early October 2020.
The arrival of PayPal, and the upcoming arrival of U.S. banks, will give more credibility to Bitcoin
At the end of October 2020, it was PayPal that announced its official arrival in the Bitcoin world for the beginning of the year 2021. The 346 million PayPal users will be able to buy and hold Bitcoin through its platform.
Even better, these users will be able to use Bitcoin as a means of payment in the 26 million businesses of the PayPal network.
I have not yet mentioned the banks that have been given the green light during the summer to buy and hold Bitcoin for their customers by the Office of the Comptroller of the Currency (OCC), which is the American regulator of banks.
Within a few months at the most, JPMorgan and other U.S. banks will offer their customers the opportunity to buy Bitcoin.
Even if this is not good news from the point of view of the Bitcoin revolution, since banks are at the root of the evils of the current system, it gives Bitcoin important credibility in the eyes of the general public.
Joe Biden may well opt for Bitcoin-friendly regulation
On November 7, 2020, Joe Biden was elected to become the next President of the United States. Joe Biden has never taken a stand for or against Bitcoin. This is a good thing when you consider that Donald Trump had been highly critical of Bitcoin and called on his administration to address it.
Joe Biden seems more open-minded to me than Donald Trump. This is obviously not an accomplishment. Joe Biden will listen more easily to the younger people in his administration when they talk to him about the need for a clear regulation of Bitcoin.
I bet that this regulation will be favorable to Bitcoin since he has already assigned Gary Gensler as a member of his transition team. Former CFTC Chief, Gary Gensler is known to be a Bitcoin advocate. He may be able to influence Joe Biden in this direction in the next 4 years.
All this Bullish news have allowed the Bitcoin price to rise from just over 1$10K in early September 2020 to over $15K today in early November 2020:
The rally we experienced last week in the midst of uncertainty about the winner of the 2020 U.S. Presidential election finally allowed the Bitcoin price to rise from $13.5K to nearly $16K in just 48 hours.
The recent Bitcoin rally has created a feeling of extreme greed in the market
This return of high volatility in the Bitcoin price has necessarily begun to attract attention beyond the Bitcoin world and the financial markets.
We are still far from having reached the general public as shown by the Google search volumes for the term “Bitcoin”, but the sentiment in the market has shifted to extreme greed:
A FOMO feeling is definitely developing.
The Bitcoin Fear & Greed Index is a metric to be taken with extreme caution. It represents only a general sentiment of the market and is only important to those who value it.
Nevertheless, the majority of people in the Bitcoin world are familiar with this metric and value it. Under these conditions, the psychological side can act to the full here. Everyone can see that the Bitcoin market is in a state of extreme greed.
A correction is likely in the short term for Bitcoin
If we look at the history of this index, we notice that the last time it had exceeded 90, the Bitcoin price had then undergone a strong correct during several weeks:
When the index had reached 92 on June 28, 2019, this then led to a correction in the Bitcoin price of several weeks. The Bitcoin price had fallen to $7.5K before of course rising again.
Today, while the Bitcoin price has been very close to breaking the $16K barrier, the Bitcoin Fear & Greed Index has reached 90 again.
I don’t know what this is going to do, but a correction will likely take place in the short term. I could be wrong, of course. It’s just a feeling.
The correction that could take place in the coming days would obviously not call into question the Bull Run that will take place in 2021 for Bitcoin. It’s just a question of time and not of if, as I like to remind people frequently.
What I’m saying here is probably more for new entrants. If you buy now at $15K, keep in mind that a short term drop is very possible. Don’t make the mistake of then selling your Bitcoins by losing control of your emotions if the price drops to $13K.
In the long run, the Bitcoin price is bound to rise sharply. The Bitcoin revolution will take time, but the Bitcoin price will reach $1 million within 20 years for me.
If you decide to buy Bitcoin, keep that in mind. This will prevent you from letting your emotions override your sense of logical reasoning in the days and weeks to come in case a correction occurs.
Be a Bitcoin HODLer, be patient. The DCA approach is best for 99% of people as long as you have complete confidence in Bitcoin, and are strong enough to continue to buy Bitcoin regularly and then HODL no matter what.Hopefully what I just told you will help you to best face the days and weeks ahead in the Bitcoin world.
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