Key Bitcoin Takeaways
- Bitcoin bloomed higher last week despite weaker demand for safe-haven assets against a prosperous US economic outlook.
- The cryptocurrency’s upward move came as a part of its quarterly bullish trend as traders raised their BTC/USD bids against a flurry of corporate adoption news.
- Nonetheless, bitcoin has turned into an overbought asset that requires a neutralizing downside correction in the sessions ahead.
Yerevan (Bitcoinist) – Bitcoin assumed two roles in the previous weekly sessions. For corporates: the cryptocurrency appeared like a safe-haven asset that could protect their balance sheets from the US dollar’s devaluation. Meanwhile, its rally against the rising long-dated US Treasury bond yields showed investors’ appetite for higher risks.
The BTC/USD exchange rate closed 18.13 percent higher in the week ending February 21. In doing so, the pair managed to secure one record peak after another, hitting an ultimate top of $58,367 ahead of the weekly session’s close. At its lowest, it was trading for $45,850.
Short-term speculators and long-term investors…
…started flocking into the Bitcoin market after Tesla, a Fortune 500 company, revealed in its filings with the Securities and Exchange Commission that it holds $1.5 billion worth of bitcoin, almost 8-10 percent of the cash reserves on its balance sheet.
The US carmaker’s entry into the cryptocurrency space sparked support and criticism across the financial circles. Economist Nouriel Roubini warned that other investors should not follow Tesla’s footsteps, calling Bitcoin a ‘self-fulfilling bubble’ whose true value is zero. Gold bull Peter Schiff made a similar call.
Nonetheless, as of Sunday, Tesla had made a cool billion dollars on its Bitcoin investment, more than what it made via its car sales in 2020. Should the Nasdaq-listed company decide to hold the cryptocurrency, it legitimizes its safe-haven credentials
to other corporates.
As a result, average Joes remain bullish based on a higher demand-limited supply scenario. There can only be 21 million bitcoins against an infinite fiat supply.
“I do think we see $100,000 in this coin before year-end,” noted Anthony Scaramucci, founder and managing partner of Skybridge Capital, in his interview with CNBC. “It’s just a supply and demand situation. You don’t have a lot of supply out there and very heavy demand.”
Skybridge holds a little over $500 million worth of Bitcoin under management.
Bitcoin bled at the beginning of this week, falling up to 4.22 percent to $55,150 on profit-taking sentiment. The cryptocurrency’s plunge also coincided with its alarmingly overbought signals, based on its Relative Strength Indicator readings. It means the BTC/USD rate is higher than its intended valuation.
Ideally, the pair should correct further lower before it decides to resume its medium-term uptrend higher. But with equities in the US stock market cooling off, the likelihood of Bitcoin attracting alternative bids cannot be ruled out either. Higher yields so far have done little in offsetting Bitcoin’s corporate boom.
On Friday this week, the Core Personal Consumption Expenditures (PCE) Price Index, which the Federal Reserve considers as its favorite gauge for inflation, will be a key indicator to watch. The market consensus points to a yearly increase of 1.4 percent. Meanwhile, a higher projection expects to push the bond yields higher.
Bitcoin could benefit as investors believe they don’t need to play it safe. Yet, the flagship cryptocurrency remains a safe-haven in pop culture.
Key Support Area: $52,000-54,000
Downside Target Area: $43,000-$46,000
Key Resistance Area: $57,000-58,000
Upside Target: $60,000
Source: Bitcoin Weekly Outlook: Overbought Fears Persist Despite Corporate Boom