This Bull is not like the Others
This cycle for Bitcoin is not like the others, so all bets are off on predicting what happens next. I break down why this cycle may be dependent on institutional investment and government as well.
Disclaimer: I am not a financial advisor.
Ok. For those who will hold Bitcoin thru hell and back - it probably doesn’t matter too much on what I am about to say. But I think deep down we all know everyone has a limit. For many of you, last week probably tested your limit to the edge, dropping 50% from all time highs.
Either way, I think it’s safe to say we would all sleep a little better knowing more about what is actually happening this bull cycle.
This cycle is different
I recently posted an article highlighting how the graphs of 2013, 2017 and 2021 were following a very similar pattern. But now, I am not so sure. 2021 has a mind of its own. We are in DAY 181 of the bull cycle, and it’s showing signs of weakness 100 days too early.
There are obviously major differences between 2021 and previous years. For one, there is highly leveraged trading that is impacting the price of bitcoin much more than in 2017. Another factor is the shift in support from institutions. I can’t decide if these are good or bad for Bitcoin, but in my gut I feel like Bitcoin is rejecting the influence of leveraged trades and big institutional buys and that is driving big downward movements of the price.
Transfer from Paper Hands to Diamond Hands
One of the most important stats I look at is exchange flows. This is analyzing how much bitcoin is being taken out of the exchanges vs being put in. Obviously, if people are moving their Bitcoin into exchanges this usually means they are about to sell it. So In = Bad, Out = Good. In the graph below we see the last month we were seeing a lot of inflow (bad) - represented by green. But after last weeks 50% correction, we are now seeing outflow (good).
In summary, the fewer Bitcoins we see in exchanges, the better chance for the market to go up.
Perhaps this big “dip” we see in 2021, that we did not see in past years is not a BULL to BEAR shift, but rather a massive transfer from small holders (traders) to large institutional holders. This would be the most obvious explanation since this aspect never existed before.
Short Term holders to Long Term Holders.
What happens Next?
Honestly, I don’t think anyone knows. I think one thing that everyone can agree upon is the next 30 days will determine how long this Bull run will go. Right now we are struggling to break through the 40k barrier. If this struggle fails, we could see another major drop.
Certainly there are X factors that could give us the “artificial” FOMO Boost we need to get back on track towards 48k support. This could include a positive move on XRP and SEC decision, ETF Approval or another major corporation disclosing they bought Bitcoin. This is what took us from 40k to 60k last time.
Whether we go up or down, I think the elephant in the room that will take Bitcoin to 100k or 20k is how the U.S. Government plays their cards. I hate to say it, but even though the Bitcoin community has done everything they can to be non-centralized - the price of Bitcoin may well be determined by the U.S. Government after all.