Bitcoin breaks 18K, but caution is more important than ever

Bitcoin breaks the 18K barrier in the biggest bullish rally in recent years, which shouldn’t make us forget the caution when investing.

Without a doubt, Bitcoin has been the best performing asset of the year, with a 130% gain so far in 2020. Just a few months ago, Bitcoin was still stuck at around $10,000, now it’s turned to $16,000 as its support, while everyone’s talking about its upcoming arrival at $20,000.

But will we see Bitcoin break 20K before the end of 2020?

On the morning of November 18, Bitcoin broke 18K for the first time since 2017, subsequently losing 3% in a matter of hours. ETH also plummeted from a high of $495 to $470.
Bitcoin breaks 18K. Source: TradingviewBitcoin breaks 18K.

In the opinion of Ian Balina, the CEO of Washington-based Token Metrics, a major correction may be coming: „Although it’s still up in the long term due to macroeconomic factors and large corporations entering the crypto market, we expect Bitcoin to correct to around $14,000 by the first week of December.

What does the technical analysis tell us about this trend?

In the last week, Bitcoin has tried to establish a strong foothold at $16,500 by failing several times. A clear break from this level could take Bitcoin to $17,200, its last major hurdle before reaching 20K; but if buyers don’t manage to secure this level, Bitcoin could fall back to the previous limited area between $15,725 and $16,120.

In the 1-hour graph, the Fibonacci retracement indicates that Bitcoin could face setbacks at the 38.25% or 50% level. In other words, a drop to $16,103 or $16,056 is possible.

As for the RSI, there’s significant overbought, indicating a potential massive sale. Source: TradingviewAs for the RSI, there is a significant overbuy, which indicates a potential massive sale.

Andrew Gonci, CEO of Green Bridge Investing, has warned that 16K would be a good level for some investors to make a profit: „Most people think you should be completely in or completely out, but if you bought 100 million Bitcoins at 10k and now it’s 160 million at 16k, you’re likely to take at least 16-32 million off the table.

Key events to follow in the short term

Bitcoin remains under the influence of the US elections. It’s not clear where the two seats in the Georgia Senate will go. If the Democrats lose these two seats it could hinder the implementation of a second anti-Coronavirus stimulus package, without which ultra-low interest rates and endless bond buying are impossible.

It is generally agreed that lower U.S. Treasury yields and increased liquidity will encourage investors to put more money into the crypt-currency market.

Unlike the 2017 rally, which was strengthened by retail traders and the spot market, the momentum Bitcoin gained in recent months came mainly from institutional investors and large corporations.

Institutional giants such as Square Inc, PayPal and JPMorgan have sent positive signals for Bitcoin adoption, which in turn increases investor confidence that Bitcoin could act as an investment diversifier in times of uncertainty. A break above 16K could revive retail traders‘ enthusiasm and add fuel to the bullish rally; while setbacks could cool the market.

On Friday, news came that Skybridge Capital could invest $3.6 billion in Bitcoin. Skybridge is just one of many traditional investors showing great interest in Bitcoin.

Jesse Proudman, CEO of Strix Leviathan, a crypto-currency hedge fund, comments that the sentiment surrounding Bitcoin has improved significantly in 2020: „In recent weeks, the sentiment around Bitcoin has improved dramatically, driven by a steady stream of news about the growing institutional interest.

In the long term, Bitcoin’s rise is almost unstoppable. If it claims $17,200, the next resistance would be about $19,700. By then, we may know if the post-Halving rally is coming.
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In the short term, Bitcoin still has room to fall if the pandemic worsens, so we’ll experience Bitcoin’s high volatility again. Any good news on COVID-19 vaccine research or stimulus packages will give Bitcoin a boost.