Bitcoin Fails to Break the $20K Mark Right Now for Two Main Reasons
The psychological aspect plays a major role here.
|Sylvain Saurel||Dec 5, 2020||1||3|
After a correction that was as strong as it was fast, the Bitcoin price finally managed to beat its year-end 2017 All-Time High (ATH) on most exchange platforms. All in all, everyone agrees that Bitcoin managed to reach a new ATH close to $20K.
The exact price of this new ATH varies depending on the exchange but also on price aggregating sites such as CoinMarketCap, CoinDesk, or CoinGecko.
The new ATH is generally between $19.7K and $19,920K. In my opinion, it is more relevant to wait until the Bitcoin price crosses $20K on all exchange platforms so that there is no more room for doubt.
This will come sooner or later. It is only a matter of time before the Bitcoin price exceeds $20K on a sustainable basis. For now, however, Bitcoin is failing to break the $20K mark. I see two main reasons for this, which I will discuss with you in this article.
The number of sell orders close to $20K is too high
It was observed several times during the week that every time the Bitcoin price was close to breaking $20K, a sharp drop occurred for a quick return to $19K.
The reason for this is simple: there are a very large number of sell orders placed just below $20K.
Every time Bitcoin price tries to break $20K, there is a strong rejection:
This creates a strong level of resistance just below $20K. A lot of people place orders at this level to try to sell based on what happened during the Bull Run at the end of 2017.
The $20K mark becomes a real psychological barrier
Under these conditions, the $20K mark becomes a real psychological barrier, just as the $10K barrier that Bitcoin struggled to cross again after its third Halving was.
The $20K price is particularly significant because it was at this level that the market began to turn around violently during the bull market rally at the end of 2017.
The Bitcoin price had quadrupled in just two months before experiencing the biggest correction in its history in the subsequent two months. The Bitcoin price had then fallen by 70%:
The bull rally of 2020 is fundamentally different from that of 2017 ...
For me, the bull rally of 2020 is totally different from that of 2017 in terms of fundamentals. At the end of 2017, we had witnessed a euphoria among retail investors.
The FOMO sentiment had taken over the market and everyone wanted Bitcoin for fear of missing the next big thing. In 2020, the Bitcoin bull rally is driven by smart money. Whales, institutional investors, and large companies have been at the wheel since the beginning of October 2020.
This is confirmed by analyzing Google search volumes for the terms "Bitcoin" and "Buy Bitcoin". They remain ten times lower than they were at the end of 2017 during the previous Bitcoin Bull Run.
Retail investors have not yet returned en masse to the Bitcoin world.
... But at the technical level, similarities cannot be ignored
While the current bull run is different in fundamentals, when we look at the technical analysis, we realize that the similarities are strong. We cannot ignore the fact that the Bitcoin price has risen very sharply since the beginning of October 2020.
In two months, the Bitcoin price has gone from just over $10K to a new All-Time High. This necessarily reminds us of what happened at the end of 2017.
Many investors, therefore, expect a sharp correction in the Bitcoin price. The one we got last week was just an answer to a FUD tweet from Brian Armstrong. Within a few hours, the Bitcoin price had gone from $19.4K to $16.4K. Nevertheless, the price of Bitcoin rebounded very quickly.
This confirmed that the bull run was not over. Reaching a new ATH may have marked the end of the current bull run.
Whales seem to think this bull run has reached its peak
Psychological blockage generally concerns retail investors. They are the ones who let their emotions take precedence over their sense of logical reasoning when the market turns to the FOMO feeling or the FUD feeling.
The purchases made by a growing number of institutional investors over the last two months are more in line with a long-term view of Bitcoin's upside potential.
These investors are aware that a correction is possible, so they will not panic at the slightest sharp drop in the Bitcoin price. They are rather in a "buy the dip" mindset in my opinion.
Nevertheless, if they can take advantage of the volatility of the Bitcoin price to accumulate more BTC, they will not deprive themselves of it. For example, we have been observing for the last few days that BTC outflow from the main trading platforms has been falling. Whales have stopped massively withdrawing their BTC from trading platforms.
This means that they probably think that the current bull run has reached its peak. They are therefore preparing to sell. This creates significant selling pressure which continues to lock the Bitcoin price below the $20K mark.
At the time of this writing, the Bitcoin price is $19.1K. The Bitcoin price has just rebounded after testing $18.5K. It is difficult to say what will happen in the next few days. My feeling is that a bigger correction, in the order of 20 to 30%, will take place in December.
This correction will be healthy and will purge the market as we are used to saying. Once this correction is over, the Bitcoin price will be able to resume its rise. The year 2021 will then begin, and Bitcoin will be able to resume its forward march towards the expected $100K price by the end of 2021.
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