Bitcoin, at the time of this writing, cost just under $ 40,000. In fact, just over 48 hours ago, the world’s largest cryptocurrency was oscillating below the $ 42,000 mark.
Let that sink – $ 42,000! Just over a month ago, the cryptocurrency was valued at $ 18,500, with the most important question on people’s minds – will Bitcoin be able to breach its ATH 2017 and stay above that range for a long time? Since then, in the month, BTC has risen more than 120% on the charts. Needless to say, this question was answered in the affirmative in the strongest possible way.
Now, the increasing influx of institutions and the growing reputation of Bitcoin as a barrier in times of political and economic uncertainty may have contributed enormously to the referred rally, but the scale of this has given rise to another pertinent question – How sustainable is this rally?
The keyword here is “sustainable”. Certainly, Bitcoin can’t keep going north like that, can it? After all, even many in the crypto-community are skeptical. Anthony Pompliano of Morgan Creek Digital, for example, with the executive recently commenting that he won’t be surprised if the cryptocurrency sees a 20% to 30% drop in the near future.
Even JP Morgan, one of the most reputable investment banks in the world, recently noted that, although yes, Bitcoin could rise to the $ 50,000- $ 100,000 range, that would be unsustainable, especially since there are already signs of “speculative craze” .
Interestingly, a key metric seems to highlight the likelihood of unsustainability as well. As pointed out by Ryan Selkis de Messari, CaseBitcoin’s doubling time metric (the days it takes BTC to double from a previous limit) has shown unfavorable multi-year lows this week.
Source: CaseBitcoin
As can be seen in the attached graph, doubling times have always fallen whenever Bitcoin has observed a maximum price. This is the case now too, with the doubling time to lows of several years. This is good news, right? Well, yes, but if history is any evidence, these casualties have often been followed by significant sales in the market. It happened in April and November 2013, as well as in December 2017.
So there is a good chance that the sales people have been waiting for may finally show up now. And while this may sound like bad news, as Selkis was quick to point out, many “who have been around for a few Bitcoin cycles are counterintuitively hoping for a setback and a period of consolidation now.” A break, they feel, even if it involves sales, will not necessarily be that bad.
However, hold your horses. While the aforementioned metric and JP Morgan may be arguing that sales are coming and that the current high is not sustainable, it is important to note that some other metrics suggest that there are more advantages to be served by the cryptocurrency.
Consider just these two – Dormancy flow adjusted by the entity and NVT ratio.
The first, yesterday, rose to touch a crucial bullish cross. According to Glassnode,
“This [Entity-adjusted Dormancy Flow] it can be used to time market lows and assess whether the bull market remains in relatively normal conditions. This helps confirm whether Bitcoin is in a primary bullish or bearish trend. “
Simply put, the metric seems to suggest that the bull market has finally started. Furthermore, thanks to the good moment in the Bitcoin market, it seems that it would not be an uncertain business again, as was the case in July 2019.
#Bitcoin The dormancy flow reached the bull / bear limit.
Graphic: https://t.co/GkjVilcrCm pic.twitter.com/QYheM0aReA
– glassnode (@glassnode) January 8, 2021
Moving on, let’s take a look at the NVT relationship. As highlighted by Stack Funds in its January 7 newsletter, Bitcoin’s 30d NVT is trading between 65-70. What this means? Well, that means that despite the exponential nature of Bitcoin’s rise, it is not overvalued and, as it is not yet overvalued, the question of the sustainability of the price rally does not arise either. In fact, reading suggests that there is more room for advantages in graphics.
These are not the only metrics that point to the same, however. According Qiao Wang, with most long-term hodlers postponing the sale of their Bitcoin at that price level, a 2013-style double bubble seems likely. Therefore, even if there is some liquidation, despite any regulatory shocks, the purchase of FOMO and dip whales is likely to keep the cryptocurrency trade strong.
Unsustainability often implies that a rally is not built on a solid foundation. This is not the case with Bitcoin, as its rally is built on solid foundations that are worth years. Although the scale of its rise seems unreal, the metrics seem to suggest that a positive side is possible.
This does not mean that the market will not see any correction. It certainly will be. But, what it does mean is that if you are concerned about a crash after the “unsustainable” rally, it will not happen. In fact, according to estimates, more than 90% of the hypothetical downturns will not see Bitcoin drop below $ 22,000.
Simply put, BTC may never touch your 2017-ATH again. Not bad for a rally considered unsustainable by some, huh?