$60K is now more likely for Bitcoin than $20K, Bloomberg's senior strategist asserts
By Kathi on Jul 26, 2021 | 03:36 AM IST
The analyst also treats the latest crypto ban in China as
bullish for Bitcoin and the U.S. dollar.
Bitcoin (BTC) has a better probability of recovering back
to $60,000 than breaking below its current support level of $30,000 to target
$20,000, believes Mike McGlone, senior commodity strategist at Bloomberg
Intelligence.
In detail, the BTC/USD exchange rate entered a prolonged
consolidation period near $4,000 following an 80%-plus crash in 2018, but a
sudden run-up in 2019 sent its prices to as high as $14,000 on some exchanges.
McGlone, who's known for his previous bullish calls on
Bitcoin, noted that BTC, which has been consolidating near $30,000 since May,
could post a similarly surprising rally while aiming to hit a refreshed
resistance target near $60,000.
"The more tactical-trading-oriented bears seem to
proliferate when Bitcoin sustains at about 30% threshold below its 20-week
moving average, allowing the buy-and-hold types time to accumulate," the
strategist wrote.
Bitcoin's bearish and bullish cycles appear to wobble
around three key moving average indicators: the 20-week exponential moving
average (20-week EMA; the green wave), which serves as interim
support/resistance, the 50-week simple moving average (50-week SMA; the blue
wave), and the 200-week simple moving average (20-week SMA; the orange wave).
During bull trends, Bitcoin prices typically stay above the
three moving averages. Meanwhile, bear trends see the cryptocurrency's prices
closing below the 20-week EMA and the 50-week SMA, as shown in the chart above.
The 200-week SMA typically serves as the last line of
defense in a bear market. So far, Bitcoin has bottomed out twice near the
orange wave, each time sending the prices explosively higher. For instance, a
take-off from the 200-week SMA in 2018 drove Bitcoin prices to almost $14,000.
Similarly, the wave support capped the cryptocurrency's
downside attempts during the COVID-19-led crash in March 2020. Later, the price
bounced from as low as $3,858 to over $65,000.
Bitcoin is now in its third drop below this trendline since
2018. The cryptocurrency has broken below the 20-week SMA (near $39,000) and is
now targeting the 50-week SMA (circa $32,200) as support. If the old fractal is
repeated, it should continue falling toward the 200-week SMA (around $14,000).
However, McGlone believes there could be an early rebound.
As a bullish fundamental, the strategist pointed toward the recent China crypto
ban.