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Bitcoin Analysis 2021

Bitcoin bull market ‘2nd leg has started,’ says BTC price model creator

The popular prediction model has been remarkably accurate in the past when it comes to forecasting Bitcoin's bearish and bullish cycles against its rising scarcity.

Bitcoin (BTC) marking a new high of $67,000 last week has opened the possibility to hit $100,000 by the end of this year.

According to PlanB, the creator of the popular stock-to-flow (S2F) model, called Bitcoin's price retracement from the $60,000-level the "2nd leg" of what appeared like a long-term bull market.

In doing so, the pseudonymous analyst cited S2F that anticipates Bitcoin to continue its leg higher and reach $100,000-135,000 by the end of this year.

The price projection model insists that Bitcoin's value would keep on growing at least until $288,000 a token due to "halving," an event that takes place every four years reducing BTC's issuance rate by half against its 21 million supply cap. 

Bitcoin after 2012, 2016, and 2020 halving. Source: PlanB

Notably, Bitcoin underwent three halvings so far in 2012, 2016, and 2020.

Each event decreased the cryptocurrency's new supply rate by 50%, which was followed by notable increases in BTC price. For instance, the first two halvings prompted the BTC price to rise by over 10,000% and 2,960%, respectively.

The third halving caused the price to jump from $8,787 to as high as $66,999,  a 667.50% increase. So far, S2F has been largely accurate in predicting Bitcoin's price trajectory, as shown in the chart below, leaving bulls with higher hopes that Bitcoin's post-halving rally would have its price cross the $100,000-mark.

Bitcoin S2F as of Oct. 26. Source: PlanB

PlanB noted earlier this year that Bitcoin would reach $98,000 by November and $135,000 by December of this year, adding that the only thing that would stop the cryptocurrency from hitting a six-digit value is "a black swan event" that the market has not seen in the last decade.

An 80% crash later

Despite the high price projections, Bitcoin should still see big corrections in the future. PlanB thinks the next crash would wipe at least 80% value off Bitcoin's market cap, based on the same S2F model.

Related: COVID-19 vaccine will spark Bitcoin ‘crash’ — Rich Dad Poor Dad author

"Everybody hopes for the supercycle or the 'hyperbitcoinization' to start right now and that we do not have a big crash after next all-time highs," the analyst told Unchained, adding.

"As much as I would hope that we don’t see that crash, I think we will. I think we’ll be managed by greed right now and fear later on… and see another minus 80% after we top out at a couple of hundred thousand dollars.”
BTC/USD daily price chart. Source: TradingView

But not everyone thinks the next correction will be as dramatic as the previous ones. Dan Morehead, the CEO of Pantera Capital, said mid-October that the next Bitcoin price drop would be less than 80%, citing a consistent drop in selling sentiment after each halving cycle.

Last week, Bitcoin (BTC) established a new record high at around $67,000 following a 53% rally in October so far. But the new highs prompted profit-taking among traders, resulting in retests of the $60,000 support level.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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CME Bitcoin futures open interest hits 8-month high, greater than when BTC price was at $65K

Open Interest surged to $3.22 billion Thursday to levels not seen since February.

Open interest (OI) for Bitcoin (BTC) Futures trading on the Chicago Mercantile Exchange (CME) inched toward a new record high Thursday as BTC reclaimed its five-month high of $58,550 on BitStamp.

The total number of outstanding derivatives contracts on CME Group's Bitcoin Futures market reached $3.22 billion, according to data provided by ByBt.com, just $40 million below its record high logged in Feb 2021. Nonetheless, the OI came out to be higher than it was at the Bitcoin price's peak in mid-April.

In detail, the Bitcoin Futures OI on CME was $3.02 billion on April 14, the day on which the BTC price—nearly reached $65,000. But on Thursday, the OI was more than 6% higher than the readings from mid-April, even as the BTC price wobbled inside the $57,000-$58,550 price range.

CME Bitcoin Futures open interest. Source: ByBt.com

Traders often use OI as an indicator to confirm trends in both derivatives and spot markets. For example, a rising number of outstanding derivatives contracts gets interpreted as new money coming into the market, irrespective of the bias.

Meanwhile, in the case of Bitcoin, a rising open interest in the futures market appears indicative of accredited investors' wanting to increase exposure to BTC.

Commercial sector increases Bitcoin Futures exposure

The latest OI readings suggest that more institutional capital is entering the Bitcoin market. As a result, investors have been looking more confident in opening new positions in the $50,000-$58,000 price range, with the CME volumes trending higher in the past seven days.

Bitcoin futures — volume and open interest. Source: CME

Analysts see a uniform rise across OI, volume, and price as signs of new buying in the futures market. That also puts the underlying asset in a better position to continue its uptrend. So it seems, Bitcoin is undergoing a similar upside trend.

Prime evidence for a bullish Bitcoin comes from the Commodity Futures Trading Commission's record released on Oct. 5. It notes that the commercial sector — which comprises corporate hedgers — have accelerated their Bitcoin Futures purchases; they now hold a net position of more than 10,000 BTC.

CME BTC Futures exposure changes. Source: CFTC, Forbes

At the same time, however, hedge funds and retail investors have emerged to be net short in the Bitcoin Futures market. Nevertheless, that could be their tactic to offset long positions elsewhere, such as in the spot market.

That is primarily due to a higher annualized premium available on CME Bitcoin Futures prices over spot markets. In recent days, CME Bitcoin futures price has been regularly trading 15% above BTC spot price, compared with around 7.7% on average in the first nine months of 2021.

Bitcoin Futures premium against spot prices. Source: Skew 

Macro fundamentals behind Bitcoin resurgence

The latest bout of buying in the Bitcoin spot market also appeared in the wake of statements coming from U.S. regulators.

For instance, Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), and Jerome Powell, the chairman of the Federal Reserve, discouraged a ban on Bitcoin. Meanwhile, the increasing prospect of a Bitcoin ETF approval by the SEC has also fueled the "buy the rumor" narrative.

Related: Bitcoin analyst ‘highly doubts’ return to $50K — Will the weekly close spark a correction?

Investors also sought exposure in the Bitcoin market as consumer prices continued to soar in the U.S. According to the Labor Department, the Consumer Price Index (CPI) rose to 5.4% year-over-year in September for the first time in thirteen years.

JP Morgan Chase noted in its recent report that higher inflation prompted institutional investors to seek exposure in Bitcoin, with some even seeing the cryptocurrency as a better haven asset than gold. In another report published in Jan 2021, the U.S. banking giant had anticipated the BTC price to reach $140,000 in the long term.

"A crowding out of gold as an ‘alternative’ currency implies big upside for Bitcoin over the long term," it had noted.

"A convergence in volatilities between Bitcoin and gold is unlikely to happen quickly and is in our mind a multiyear process. This implies that the above-$146,000 theoretical Bitcoin price target should be considered as a long-term target, and thus an unsustainable price target for this year.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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