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Will Gamestop/AMC Robinhooders Flock to Bitcoin? (1/28/21 Forecast)

Bitcoin fell again on Wednesday, dropping below the $30K level before recovering a bit, closing the daily candle just above $30K. This is a bearish candle as Bitcoin continues to retest support at $30K as Bitcoin looks to continue lower before resuming higher. 

(January 27, 2021  7:30PM EST)

Outlook: 

Bitcoin continued its grind lower Wednesday, reaching underneath the $30K level before buoying just above it by the close. This is a pretty clear-cut short-term downtrend as Bitcoin has retraced to the 38.2% Fibonacci retracement level thus far, which may hold as support, though it's looking like we may drift one level lower. If that's the case, then I think Bitcoin will most likely find a litany of buyers around the 50% fib around $25K, and a mountain of buy orders between there and $20K. All things considered, this is a very healthy looking correction, as parabolic blowoff tops and non-stop bullish candle rallies must end eventually, and rather than dropping like a rock, Bitcoin has steadily and gradually grinded lower to digest the gains. It certainly seems like Bitcoin has cooled off quiet a bit since it peaked right after the new year, so we should start looking for a bottoming pattern over the next few weeks as Bitcoin prints a higher low on the daily chart. 

Primary/Alternate Views: 

As you can see in the chart above, the black line is my primary view, indicating further downside before finding support in the mid-$20,000s to find a bottom and then resume higher. 

My alternate view, in grey, would be if Bitcoin has already put in a bottom around $29K for this correction, a ~31% retracement from the $42K high, and we are now forming a bottoming pattern that should continue to trade sideways as we rebuild momentum to go higher from here. 

Reddit WallStreetBets/Robinhood Fallout

Crypto has been pretty quiet lately, especially in comparison to the recent Reddit r/WallStreetBets and Robinhood spectacle of putting short squeezes on hedge funds who have received humongous cash bailouts and have exorbitant short positions on stocks. Though it seems like the situation has gotten under "control" by regulators and trading platforms suspending trading of certain stocks, it's becoming extremely apparent that the very establishment and rigged system of hedge funds manipulating markets to make a profit off retail traders, overleveraging to further manipulate markets, and then get bailed out by billions (or trillions) when things don't go their way is the same impetus for which Bitcoin was created. 

But what the Reddit and Robinhood communities haven't really understood yet is that they're playing a rigged game in a system that they are designed to have a disadvantage in. This is precisely the reason Bitcoin was created in 2008 following central banks failing and being bailed out to continue their errant ways; to create an entirely new system that is not controlled, governed, regulated, or supplied by central banks, federal reserves, or governments. I think once the Gamestop and AMC hysteria dies down, we may see a herd of disenfranchised retail stock traders who have recently had a taste of financial ability see the light that crypto has to offer and see how participating in crypto, e.g. buying Bitcoin, is trading fiat of a broken system and using it to buy into an entirely new system that is autonomous, trustless, decentralized, fungible, immutable, and cannot be shut down or suspended. Once that happens, and I think it's "when" not "if," that should provide another new wave of buyers as Bitcoin continues to grow and gain market penetration among billions of bankless, underbanked, or otherwise taken-advantage of in financial markets. 

Current gameplan: 

In the meantime we're just playing the waiting game, continuing to DCA with small amounts on a weekly basis. It may seem expensive now but if the multiple longer-term models such as the Bitcoin Stock-to-Flow Model (S2F) below is of any indication of where Bitcoin is likely to head from here, it's up and by a lot. That being said, I think adding small amounts of Bitcoin here and especially on dips as well as even finding ways to earn Bitcoin however possible is a wise move before it's too late/expensive. By looking at the updated S2F model below, you can see the model portends Bitcoin will be valued at over $100K at the peak of this cycle, which we are rapidly approaching. 

As far as price targets go, I think it's only a matter of time before BTC hits $50K, $75K, and then $100K, the first of which we will almost certainly see in H1 2021. As you can see in the updated Stock-to-Flow model above, I think Bitcoin recovers in the short-term back up to the current ATH to test the ~$42K level, parries a weak technical rejection, and then breaks higher to continue to $50K where Bitcoin will achieve the $1 Trillion market cap for the first time. 

Support: We're closely watching the $30K level which has been tested and breached multiple times over the past week or so. If Bitcoin falls below, look for support around $25K, and then $20K -- if we even get there (probably not but who knows?).

Resistance: Look for resistance at large, round psychological numbers in $5,000 intervals: $40K, $50K, etc. I imagine $50K would be strong resistance, although the bigger Bitcoin gets the more legitimacy it gains = more institutional investors can justify taking initial positions. 

 

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