Bitcoin Weekly Forecast: BTC struggles with $50,000, but few mainstream investors remain doubtful

Bitcoin price has been in a choppy phase since its first attempt to breach $50,000 on August 23 failed. The subsequent attempts seem to briefly slice through this barrier but fail to sustain above it.

Cryptocurrency adoption has two factions

Bitcoin adoption seems to be going well despite the May 19 crash or the choppy markets that followed it. Many countries are warming up to BTC in one way or another, which has given rise to two factions, the supporters and the ones that stay away from cryptocurrencies altogether.

JP Morgan, the financial giant, seems to have qualities of both. In a recent report, the bank’s analysts pointed out the recent upswing in altcoins and the craze around NFTs.

The analysts added,

The share of altcoins looks rather elevated by historical standards and in our opinion it is more likely to be a reflection of froth and retail investor 'mania' rather than a reflection of a structural uptrend.

While the stance is a warning about the recent explosion in altcoins and not an outright disregard for the digital assets, John Paulson, a billionaire investor and hedge fund guru, criticized cryptocurrencies. The CEO of Paulson and Co. stated that these assets have a “limited supply of nothing” and added that they have “no intrinsic value.”

Despite this, major institutions like MicroStrategy or Twitter still stand in support of Bitcoin.  Twitter’s latest beta update reportedly includes a tipping feature that allows users to tip BTC. 

In reply on September 1, Dorsey confirmed the reports by agreeing that Twitter might use African partners for this purpose as a milestone for the future.

On a similar yet bullish note, Alexander Lukashenko, the Belarusian President, has called on the government to mine BTC during a speech at the Petrikovsky mining and processing plant on August 27.

The president pointed out that Belarus has enough abandoned industrial sites and spare electricity infrastructure to mine Bitcoin and use that as an additional source of revenue.

While the mining exodus triggered by Chinese regulation wreaked havoc, things seem to have calmed down after migrating to mining-friendly countries.

With BTC attempting to cross the $50,000 level, the technicals also promise gains in the near future.

Bitcoin price has one critical barrier to breach before $60,000

Bitcoin price kick-started a massive uptrend on July 21 at $29,000 and climbed to $48,000 in less than a month. After hitting a local top, BTC began consolidating and attempted to breach the $50,000 psychological level thrice but failed each time.

Currently, the pioneer cryptocurrency is just above the $49,000 support level and needs to flip the $51,483 resistance level into a demand barrier. Doing so is likely to trigger a massive upswing to nearly $57,000.

During the May 12 crash, BTC quickly moved lower, creating a gap known as the “fair value gap”. Markets often close this gap and can be thought of as a reversion to the mean. Therefore, a decisive close above $51,483 is a bullish outlook.

This upswing, while optimistic, could attract retail investors, creating a positive feedback loop and pushing BTC to retest the next psychological level at $60,000. In a highly bullish case, the all-time high at $64,854 might also be retested.

BTC/USDT 1-day chart

Supporting this bullish outlook is IntoTheBlock’s Global In/Out of the Money (GIOM) model, which shows that $56,575 is the only significant level that plagues the upswing. Here, roughly 3.46 million addresses purchased 1.54 million BTC. 

These investors are currently underwater and chose to break even, adding selling pressure and dampening the ascent. Therefore, clearing this barrier is exceptionally bullish anda key metric to keep an eye on.

BTC GIOM chart

Adding a tailwind to this is the increase in the daily active addresses on the Bitcoin blockchain over the past two months from roughly 775,000 to 1,000,000.

This 29% uptick in the new users indicates the potential inflow of new capital, which is a bullish sign.

BTC daily active addresses chart

Perfectly in sync with the growth in daily active addresses is the increase in the transaction volume metric. This on-chain index rose from $34 billion to $205 billion since June, denoting a 500% increase, indicating that the capital inflow has increased.

This growth is a bullish sign and indicates that investors are reentering the markets and remain optimistic about the performance of Bitcoin.

BTC transaction volume in USD

Lastly, the supply shock model, which shows investor demand for BTC, has reached the peak accumulation phase. This stretch of time is usually seen as a place where long-term holders accumulate the bellwether crypto and are generally followed by an explosive bull run.

Willy Woo stated in his newsletter that the 2021 bull run is unlikely to end now. He added,

Now is a low risk time to be accumulating BTC... the demand and supply factors at play point towards a continued bull market into 2022. The majority of the market expects a bear market in 2022, however long term on-chain structure does not support this. I suspect this has not yet been priced in, especially in the long term options markets.

BTC supply shock model 

All in all, the on-chain metrics are pointing to an optimistic outlook for Bitcoin price. Combining this with the technicals that hint at a run-up to $60,000, it seems that BTC is poised for an explosive move.

While things seem bullish for Bitcoin price, a failure to break past $50,000 that leads to a pullback to $46,000 will be concerning. However, if BTC creates a lower low below $44,705, it will invalidate the bullish outlook.

In some cases, this move could result in a crash to $41,330 or $40,550.