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Bitcoin Outlook for 2020: Bullish or Bearish?

Current State of the Market

With the world in a frenzy to determine the outcome of the government lockdowns across the world, we are seeing a phenomena in crypto that has yet to be seen until now. Before this crisis became clear to the mainstream media and the institutional investors, it was clear to those who were paying attention to the reckless monetary policy of the fed and fiscal policy of the white house. Until recently the best bet against the institutions was crypto. It was at least a non-correlated asset. That means it was not tracking the price movement of another security, asset, or other financial instrument. It followed and created it's own technichal price movements and led those of smaller alt-coins. Since early March however, it has been correlating heavily with traditional financial markets. This has become increasingly evident in the last two weekends in particular. During the week, when the Dow and S&P are being actively traded, and overnight during Mon-Fri, Bitcoin follows it's price action minute-by-minute. Btcoin has had two weekends in a row where price was not confined by it's correlary parent asset, and had large spikes to key resistance levels. Last weekends was short-lived, having an overnight surge and subsequent rejection, however this weekend finds us in the same price range with seemingly greater support and a more organic laddering of support and resistance up rather than an impulsive spike. This weekend behavior for Bitcoin places technichal analysts in a sticky position. The global economy is all but certainly headed into a prolonged depression, which it is still to be seen if it will be inflationary or deflationary and the weight that will have on Bitcoin moving forward. Due to the fact that centrals banks all over the world have essentially 10x the global currency supply, bets should be placed on inflationary but more on that later. Divergence from this correlation is going to be a key moment in Bitcoin's history. It is almost certain to take place within the next 3-6 months, but not clear exactly when. It could be the halving that sends Bitcoin skyrocketing while traditional makrets continue to fall, or not. The halving event this year will take place with Bitcoin's largest audience to date, and the sentiment is mixed between heavily bearish (correlation continues into short-term future) and bullish (divergence wins out sometime soon.

Some Reasons for Bullish Outlook

The recent stimulus bill passed in the US with a sizze of 2 trillion, only 1/5 of what was spent in total so far, called for 1200 checks to be sent to certain citizens meeting certain criteria. Someone had the sense to check and saw that Coinbase had a huge surge in purchases for the same amount of money in the same week. This shows a sign of strong growth over the past few years in the crypto space. A rise in overall transactions would be one thing, but the fact that people are'nt working and they had the sense to use the entire check on crypto is a dramatic change from the sentiment just a year ago. Bitmain just announced it is releasing three new crypto miners, the top one of which can process 112TH/W. For anyone who is not sure what that means it is simply a large step in effeciency of bitcoin mining which in turn increases profit margins of large crypto mining farms. This comes at a pretty convenient time for miners as the halving is around the corner nad the event has had a cloud of doubt cast over it this time around by many in the crypto world. On top of that Bitcoin was created with these scenarios in mind. Whoever Satoshi Nakamoto is, he certainly understood economics and the way fiat currency sytems worked. He designed a way around the tyranny of central banks and government. Bitcoin has become a speculative asset but that onl speaks to it's underlying asset's value. At it's core, Bitcoin is a peer-to-peer transaction network whereby anyone can transact freely at a low cost and benefit from being a good saver. In times like this where banks cannot be relied on it will urge people to understnad the neccesisty of having sovereignty over your finances. For over 400 years central banks have existed, and there have been three in the United States alone, each of the first two failed within 50 years of their inception. The most recent is 106 years old. It is well over-due for a restructuring, which hasn't happened since 1971 when Nixon removed the dollar from the gold standard. That wasn't the first time either, however that is an incredibly long story. Some good resources to find out about that are here and more on the history of central banks here.

Some Reasons for Bearish Outlook

There is a heavy presence of miners in China and mining factories but with strict lockdowns and pressed supply chains these new miners may not get out at a fast enough rate and there may be a damper on the business due to lockdowns across China. The recent price action following the price of institutional markets so closely amid this highly volatile time makes for a rough path for crypto. As we enter the new week, the Dow futures market is opening down 100 points after a week of maniupulated gains on paper. A down week could continue to drag Bitcoin with it, which is likely due to the presence of large amounts of institutional money, just recently Grayscale, the US Bitcoin ETF, announced it owned 2.7% of the bitcoin market-cap. That is around 360,000 Bitcoins. If the markets stay tied to the sinking traditional markets which will only go lower over the course of the year. Bitcoin in an inflationary recession could exponentially increase the pace at which the price rises. As the Fed prints more and more it will eventually flow into crypto due to the presence of institutional traders. However in a deflationary period prior to the hyperinflation, Bitcoin would suffer as money flows out to cover the changes in traditional asset and commodity price. There is only so much to de inpreparation for this event, hyperinflation comes very fast and rises even faster. There won't be much time so things need to be in order well prior to these exponential moves.

Technichal Levels

bitcoin-chart
Chart depicting important levels discussed below on a aily time frame chart.

Short-term cash is likely to be your best hedge. Holding in the form of stable coins already loaded onto your exchange wallet would also be a good idea to allow for quick entry into the market once the price action defines itself in one way or another. Until then, key level of support is 6900, that is if this level breaks and turns to resistance a move to 6000 or below is entirely possible. Resitance currently sits around 7200, and if flipped to support the next area that will likely cause trouble will be in the 7500-7600 range.