Bitcoin Attempts To Break $16,000 (Again), But Do Fundamentals Support It?

A recurring theme in 2020 has been endorsements from high profile investors. The latest is from renowned macro investor, Stanley Druckenmiller, who earlier in the week stated he owns bitcoin and gold given he expects the dollar to depreciate in value.

Furthermore, per The Block, “JPMorgan analysts said Grayscale’s bitcoin trust saw cumulative inflows through October, whereas gold exchange-traded funds (ETFs) saw “modest outflows” since mid-October…This contrast lends support to the idea that some investors that previously invested in gold ETFs such as family offices, may be looking at bitcoin as an alternative to gold.”

Along with growing sentiment, bitcoin’s fundamentals have gotten increasingly stronger in 2020. However, after an almost 60% run-up since early October, some fundamental metrics appear to be cooling off slightly.

In 2020, stable coin flows to exchanges have been positively correlated with bitcoin price, evidenced by the chart using a 100 day moving average (white line). Recently, stable coin flows have declined dramatically, which could inhibit further growth in the near-term as there is less “dry powder” to buy dips.

Miner flows to exchanges have been historically negatively correlated with bitcoin price, evidenced by the chart using a 100 day moving average (white line). Recently, miner flows have begun to accelerate, indicating profit-taking after last week’s surge.

It’s far from definitive given the sample size is small (n=3), but, on the daily chart, using 20/50/100 moving averages of Binance’s futures open interest, golden crosses have proceeded bullish breakouts, and vice versa. Currently, moving averages are compressing towards a death cross, which could hamper price in the near-term.

From a technical analysis perspective, Rekt Capital states “This month, bitcoin has managed its first ever Monthly Close above $13900 – a resistance that previously price wicked towards before rejecting -72% in the months that followed.”

“On the Monthly perspective, bitcoin now has very few key resistances ahead before price actually challenges for a new All Time High. In fact, technically Bitcoin now finds itself within a relatively wide range of $13900-$17100.”

“Perhaps an interesting perspective is that bitcoin appears to behave in Four Year Cycles, thus a year-end close above $13900 would act as support and potentially springboard price into a new exponential uptrend in 2021.”

Zooming in, some fundamental metrics appear to be cooling off for bitcoin. Zooming out, the technical trend for price is pointing one way — up.

Disclaimer: The author owns bitcoin, ethereum, and thorchain.