- 2020 will be a challenging year for Bitcoin price, with its climax in mid-May.
- The technical situation on the BTC/USD pair is nearing a “do or die” point.
- The third Bitcoin forecast scenario of neutral lethargy would come to a slow agony.
2020 will be a challenging year for Bitcoin. Strong conundrums have to be resolved both in the fundamental and technical side, with the halving event coming around May and the long-term trend-lines and Fibonacci retracement levels coming from the 2017 big surge in play. How these arguments play out will determine whether the main cryptocurrency can confirm its status as the ultimate modern store of value, the digital version of gold.
Gold has been used for thousands of years to store and transport wealth. Today, the industrial applications of gold are very important, but in the year 3000 BC, its purpose were merely to function as a reserve of value, or just ornamental.
The first recorded usages of gold go way back in the day, in the Egypt of the pharaohs and the priests of the temples. Gold, boosted by the pharaohs and the priests of the temple, became a precious object. From that moment on, gold was accepted as a payment method.
Today, 5019 years later, the capitalization of the gold market is valued around $7 trillion.
Bitcoin was introduced into society barely 11 years ago, and in that time, it has come to hold 230 billion dollars in value.
It is an incredible achievement to gain the trust of millions of people to deposit a portion of their savings in such a new asset. Fighting the opposition of governments and the financial industry, with constant news about illegal activities, a complex buying and selling interface and with no other guarantee than a paper with the 21 words that keep you tied to your money.
To make it even more surprising, we must not forget that Bitcoin does not have a spokesperson, a governing council or anything like that.
You can be in or out on Bitcoin as a store of value, but the merit must be recognized.
Bitcoin price in 2019: Profits down the radar
2019 has been a year in which Bitcoin has done really well but, compared to previous results still very present in the collective memory, it has gone unnoticed.
Bitcoin ended the year 2018 with a value per unit of around $4000 and 12 months later it reached an annual high of $13000. That bull-run totaled a bigger-than-300% increase, and even after the subsequent fall, reaching the end of 2019 at $7400 would still represent an increase of more than 100% from lows.
This has been the nature of Bitcoin to date. Large price movements from which extraordinary profits can be made if we are able to give our trading and our emotions enough elasticity.
We do not know how it will behave in the future, although in this article I will try to provide some clues.
The volatile personality of Bitcoin
Strong variations in the price of cryptocurrencies are a common denominator, except in stable coins projects.
As we have seen, the potential closing of 2019 around the current levels of $7000 per Bitcoin would represent an increase of more than 100%, but it is not the subject of headlines nor does it raise the buying furor that we have seen in the past. The breadth and depth of the downward trends in Bitcoin, proportional to the upward trends, have made a dent in the emotional strength of investors, who can renounce excellent profitability in the face of strong volatility.
The average investor is very emotionally conditioned to be able to withstand the strong ups and downs of Bitcoin. Few non-professional investors hedge their positions with derivatives, the simplest way to conveniently navigate through the downturns.
Bitcoin and technical analysis: Respect for tradition
Throughout this year, the BTC/USD pair has covered all standard positions for Fibonacci reversals from the downtrend coming from the 2017 highs.
In mid-May it reached the 23.6% level of retracement at $7200, at the end of June it exceeded the 38.2% level of retracement at $9500 and one month later it had reached the 50% level of retracement at $11500 and the 61.8% level of retracement at $13500.
The reversal process then went into passive mode and BTC/USD gradually has been losing levels down to the current support at $7200 (23.6% Fibonacci reversal).
One characteristic of the Fibonacci retracement tool is the extension levels. If mathematics allows us to predict how far a pull-back can move, it also allows us to see projections of possible future prices above the all-time highs.
In this chart, I have pointed out the different levels of retracement and extensions for the BTC/USD pair. The first extension level beyond the historical highs is at the price level of $26391, then the second at $30419 and the third one at $47485.
All in all, the lesson to take here is that the BTC/USD pair respects traditional technical analysis tools. The BTC/USD chart allows us to observe, among other things, the way Bitcoin behaves in certain situations. After careful observation, one is able to find patterns of behavior that are repeated over time.
BTC/USD is a technically decisive pair when it comes into action, but otherwise, it is extremely calm when relax mode is on. It can spend many days in a row moving in a narrow price range, but when the BTC/USD pair starts moving up, it doesn't hesitate and moves quickly towards the target.
Bitcoin ETF as a catalyst for a bullish market
On December 2, the SEC approved the launch of an investment fund that will invest in Bitcoin futures. In this way, investors will be able to take exposure to the crypto market through its most important representative, Bitcoin.
With this approval, the SEC has taken a step in the right direction so that in the coming months it will finally approve the launch of an ETF based also on the Bitcoin futures.
Not everything in the picture is bright, though. An obstacle to the approval of the Bitcoin ETF is the recent appointment of Brad Sherman as chairman of the Subcommittee for the Defense of Investor, Entrepreneurship and Capital Markets, supervisory body of the SEC. Sherman has declared himself opposed to Bitcoin and other cryptocurrencies.
The implications of this approval by the US regulator could be enormous, though.
According to a recent survey, almost 35% of US citizens are considering some kind of investment in Bitcoin, and an ETF seems the perfect way to do this.
US citizens are used to investing in ETFs, a product that they understand and that many have in their investment portfolios. This familiarity would accelerate the approach to Bitcoin of a mass of several tenths of millions of investors.
How will 2020 halving impact Bitcoin price?
If there is one key event for the Bitcoin in 2020, it is the halving of the reward. It is estimated that by January 1, 2020, about 240K Bitcoins will remain to be mined before the amount of Bitcoins that is rewarded each time a block is created is halved.
The rate of creation of each block of the Bitcoin network is 10 minutes, so we can estimate that the halving should occur on 14 May 2020 at 17:18:49. Or at least somewhere close to that day, which puts us in May.
Up to now, there have been two halvings in the short history of Bitcoin. In the attached table we can see what has happened and then project what could happen.
Source: Insider Pro
Bitcoin has already experienced twice a halving in the mining reward.
The first of these occurred on November 28, 2012, and reduced the original reward from 50 BTC per block to 25 BTC per block. The value of the BTC/USD pair was 12.22 and after 368 days the value had skyrocketed an incredible 9218.67%, up to $1178 per BTC.
The second Halving occurred on July 9, 2016. This halving reduced the mined reward from 25 BTC to 12.5 BTC per block. At the time of the event, the value of the BTC/USD pair was $657.61 and after 525 days, the value of the Bitcoin rose 2938.57% to its historic high of $19800.
A simple progression indicates that possibly in the next event the development up to the next historical maximum would require almost three years with approximate profitability of something more than 1000% and a value close to $80000.
The effects of halving price rewards are clear. If the miners are rewarded half as much as they have been so far, either they manage to halve the cost, or the price at which they will have to sell to make mining profitable will increase. It is possible that the result will end up at a midpoint between the two approaches.
Libra, the bridge between two worlds
On June 13, 2019, the Wall Street Journal published information that Facebook was working on a major Blockchain project.
Little by little, details about the project have been known. The idea of Facebook was to launch a stable currency that could be used as a means of payment both on Facebook and in other companies that joined the project, all associated around the project from the Libra Association.
The project included the launch of the digital currency, called Libra, and a wallet called Calibra.
The announcement of the Libra project immediately caught the attention of governments and regulators. Authorities in Europe and the United States have reacted aggressively against the Libra project, which, with a potential customer base of 1.7 trillion users, could endanger the financial stability of many countries.
Of the initial 28 participants in the Libra Association, 21 remain in the project after strong pressure from politicians and regulators. The Libra Association met for the first time on October 15, 2019.
The planning of the project sets the first half of 2020 as the date for the launch of the Libra cryptocurrency.
Central Banks getting their digital coins ready
As a result of the Libra case, many governments and central banks realized that the implementation of cryptocurrencies projects was not going to wait for anyone, and decided to get down to work and launch their own projects.
China, India, France, Tunisia, Lithuania and the European Union, among others, have presented their own digital coin projects, to be launched as early as 2020.
There seems to be at least a consensus on the terminology to be used by central banks. CBDC (Central Bank Digital Coin) is the acronym chosen to designate all those digital currencies that are going to be launched on the market with the support of central banks from all countries in the world.
The ultimate goal of this digitization process is two: guaranteeing authenticity, accounting and traceability is the first, eradicating the black economy is the main one.
In my opinion, these developments legitimize Blockchain's technology and its qualities as an instrument of custody and value transfer. Bitcoin should capitalize on this to occupy the role that Gold has in the world of fiat coins, but in this case in a new world of digital currencies.
Underlying forces behind price movement in Bitcoin for 2020
Traditional markets instability (Risk On/ Risk Off)
Bitcoin's relationship with market emotions is complex.
At first sight, we can say that Bitcoin is a typical risk-on asset since it provides positive support and loss of fear, which is the mindset that helps to make an investment in such a volatile asset.
On the other hand, the argument of the maximalists is based on the theoretical safe-haven value of Bitcoin in situations of political or economic instability. This proposal is not outlandish, but I do believe that the level of economic turmoil needed for Bitcoin to be a safe-haven would need to be enormous, close to apocalyptic.
How to measure the Risk On/Risk Off in the crypto market: Bitcoin Dominance
Bitcoin Dominance is the percentage of the total market capitalization that Bitcoin holds compared to the other thousands of cryptocurrencies.
Since records exist, from mid-2014, Bitcoin maintained its level of dominance above 92%, a level it did not lose until February 2017. Things went quickly south as, by January 2018, that dominance had been trimmed to only a pedestrian 34.97%.
Throughout 2018 and 2019, among the weakness of the whole Altcoin segment, Bitcoin has been recovering its dominance. At the end of 2019, Bitcoin's dominance level reached 69.20%.
Analysts use the Bitcoin Dominance chart to capture market momentum. When the crypto market enters an uptrend, Bitcoin loses dominance, while in bear markets it goes up.
If we speak only of the crypto investment space, it is understood that beyond the stable coins, the asset that is considered safe-haven is Bitcoin, while the Altcoins would be rated as assets with an increasing component of Risk-On as the level of market capitalization decreases.
The reading of Bitcoin's dominance, and moreover the analysis of its graphical representation, is an important component of price forecasting exercises in Bitcoin.
It is important to point out that it is precisely this behavior of Bitcoin that triggers the liquidation of the weakest projects. When Bitcoin attracts a large part of the capital, it cuts off the flow of capital to the Altcoins and causes the fall of the most under-financed projects.
Altcoin Consolidation process
The crypto market has seen the number of projects listed in exchanges increase exponentially to reach a ceiling of around 4100 projects. Among all these, it is estimated that 1085 of them are no longer around and, according to experts consulted, many of the 3000 remaining will fall in the short term.
According to Andy Cheung, Head of Operations at OKEx: "The market has a consolidation ahead, in the short term, during which many projects that have not reached a minimum of acceptance will disappear".
Bitcoin Forecast 2020: The insiders' takes
Andy Cheung, Head of Operations at OKEx
“Next year, we expect to see further expansion of global payments that do not come from legacy banking institutions. Bitcoin and other digital currencies have changed the financial landscape and shifted the way we look at all assets.”
“We do believe by year-end 2020, we will see a Bitcoin ETF listed in the United States. This event could be the catalyst to push Bitcoin above $14,000. One of the main drivers for this expectation is that similar ETFs have already been approved in Europe.”
“The opportunity to tokenize assets like securities, energy, real estate and art is a natural outgrowth of the current disruption we are experiencing. STOs can portion out larger assets and give investors peace of mind on the regulatory side.”
Richard Dennis, Founder and CEO at Temtum
“The imminence of quantum computing holds major implications for the cryptocurrency industry. Today, cryptocurrencies’ pseudo-random generation of keys leaves them susceptible to exploitation by hackers. Quantum computing increases the likelihood of predicting software-generated values, presenting major security concerns.”
“Quantum-secure networks, such as those that leverage quantum entanglement to generate provable random numbers and next-generation hashing algorithms, will be poised to succeed in an era of quantum computing.”
“Bitcoin originally set out to take on legacy payment systems, but it has not successfully achieved this. Transactions on the Bitcoin network can take up to 10-15 minutes, making it ill-equipped for mainstream payments.”
“In 2020, I predict we will start to see other cryptocurrency payment systems gain momentum that tackle these challenges and deliver payment solutions that meets the needs of today’s global economy.”
Robert Beadles, President at Monarch
“In 2020, I expect to see more governments and business leaders announce their own cryptocurrencies, and while this legitimizes the industry, we must stay skeptical.”
“I predict that in 2020, the weeding out of poorly executed crypto projects will continue. We’ll see more and more cryptocurrencies that popped up in 2017 hit zero, and their teams fade away or move on to different projects. I predict 98% of crypto projects and their currencies will go to zero or have no viable exit for their hodlers.”
“I think Bitcoin’s halving in May could spike the price. I expect to see Bitcoin reach $11,000 around this time. The communities that believe in Bitcoin will continue to HODL, regardless of price fluctuations, and by now it’s clear that Bitcoin has proven itself as a long-term investment and store of value.”
BTC/USD technical analysis: What to expect in the bullish/bearish scenarios
The price movements seen in December, in the days before the release of this article, have vanished the anxiety of inaction and induced the fear of falling into an ultra-long-term bearish environment.
The most positive thing about these falls is that they have taken us to a limit situation and from there everything is much clearer.
The BTC/USD pair returns to the price zone where it slept for most of 2018, before breaking down and reaching the relative low in December of that year.
During 2019, the BTC/USD pair has set its high above $13000, back when for a few weeks euphoria took over the market again.
Since then, the BTC/USD pair has been losing strength to the current level of $6500 (E).
A visit to the next support at $5600 (C) is very likely, but as long as the last trend line (D) at the $5000 price level is not breached the uptrend continues, albeit much weaker.
According to the "post-Halving" statistic, there should be a dramatic rise in the Bitcoin price during the months following the event, which will take place in mid-May 2020. The progression explained above proposes as a theoretical target the price level of $88000.
But that same statistic makes it clear that the surge should occur months later and develop exponentially, being very small just after the event and amplifying months later.
On this basis, we can propose at least three scenarios:
The first scenario is a full bullish one. In this model, the BTC/USD pair follows the tradition and a strong bullish trend emerges since the early days of the year. It would reach the zone of historical highs coinciding with the Halving event and would continue in the direction of the favorite destination of all coiners, the Moon!
The second scenario would be quieter. Lateral bullish development would keep the BTC/USD pair below the relative maximum of $13K, attack the historical highs for the summer of 2020 and continue to rise with targets of $26K, $30K and $47K.
The third scenario is adverse. BTC/USD remains in a bullish scenario as long as it stays above the December lows of $3150. But whenever it falls below the $5000 level, the weakness will be obvious. In such case, we should expect new relative lows and, probably, the end of this funny history.
Gregor Horvat sees another potential big surge on Bitcoin price when conducting his Elliott Wave analysis:
Forecast Poll 2019
|Forecast||H1 - Jun 30th||H2 - Dec 31st|
|Average Forecast Price||12833.76||12768.74|
|EXPERTS||H1 - Jun 30th||H2 - Dec 31st|
|Alexander Douedari||10000 Bullish||13000 Bullish|
|Andrew Lockwood||7500 Sideways||5500 Bearish|
|Andrew Pancholi||77444 Bullish||9680 Bearish|
|Brad Alexander||5000 Bearish||3500 Bearish|
|Chris Svorcik||25000 Bullish||75000 Bullish|
|Chris Weston||6400 Sideways||6200 Sideways|
|Christina Parthenidou||4500 Bearish||6000 Sideways|
|Coincodex||6000 Sideways||16500 Bullish|
|Cyrus Ip||9800 Bullish||8500 Bullish|
|Dmitriy Gurkovskiy||3515 Bearish||12000 Bullish|
|Dukascopy Bank Team||13300 Bullish||19600 Bullish|
|Eagle FX Team||11000 Bullish||6800 Sideways|
|ForexGDP Team||12800 Bullish||24000 Bullish|
|Gregor Horvat||10000 Bullish||12000 Bullish|
|Ipek Ozkardeskaya||7000 Sideways||6000 Sideways|
|Jamie Saettele||5000 Bearish||6000 Sideways|
|Jeff Langin||5000 Bearish||7000 Sideways|
|Jose Blasco||5400 Bearish||5000 Bearish|
|Justin Paolini||15000 Bullish||25000 Bullish|
|Nenad Kerkez||13000 Bullish||5201 Bearish|
|OctaFx Analyst Team||13850 Bullish||7200 Sideways|
|Stelios Kontogoulas||5000 Bearish||4000 Bearish|
|Stephen Innes||8000 Bullish||10000 Bullish|
The halving event is expected to be one of the primary focuses of the cryptocurrency markets in the first quarter of 2020. The anticipation of seeing a significate BTC price surge could be more visible as the May event approaches. However, we believe that the upside of the prices may not be as notable as the previous two halvings. On the other hand, seasonal pattern suggests that BTC may have higher volatility in April, May, October, and November.
by Cyrus Ip
As long as Bitcoin trades below the 8000 level, the downside pressure seems to very persistent. Major support in the 3000-4000 level seems to be a strong base into 2020.
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