- Bitcoin broke its support levels at $6,000 and $5400
- Bitcoin is currently trading at its next demand price which is defined between $4,400 and $4,200
- Bitcoin Falling Wedge Pattern is still active – watch this video for a full explanation
If you simply type in Google search “bitcoin rally” you would get 16 million search results from major news outlets, and analysts predicting the next bitcoin rally. But can we really know when the next rally will start? Let’s see.
In this article, we will examine some factors that have lead to the previous rally and see if we can compare and look for similar signs to help us identify the next jump. But before we go ahead and explain anything, let us understand what drives demand.
What is Demand?
Demand is an economic principle referring to a consumer’s desire to pay the price for a specific good or service. Holding all other factors constant, an increase in the price of a good or service will decrease demand, and vice versa. Therefore, assets are only valued when there is great demand for it. This includes real estate, paintings, watches, and Bitcoin.
Here are a few examples: The Graff Pink Diamond is valued at $46 million, and The Card Players painting is worth $275 million, so why is that?
The only reason they are valued at these prices is that there is someone out in the world who is willing to pay for it. If the demand is zero, then they will be valued at $0 – very simple.
Bitcoin from $0.01 to $19,000
Bitcoin is no different. In the past decade (happy birthday Bitcoin), we saw Bitcoin trading from $ $0.0008 to $19,000 – this purely due to the rise in demand over the years – I hope I’m not stating the obvious.
However, for the past 11 months, Bitcoin has been falling and lost more than 70% of its value. Does that mean there is no more demand for Bitcoin? Obviously not. But, Bitcoin investor and traders had concluded that when the price was trading at $19,000, $15,000 or even $12,000 – Bitcoin was overvalued. Then, the supply started to roll in. Investors who have bought at low prices earlier in 2018 saw it as an excellent opportunity to begin liquidating their coins.
Bitcoin started falling in no-time. However, what is the real demand price for Bitcoin and when will it rise again?
Bitcoin’s demand price
Let’s start with answering the first question: What is the real value and demand price for Bitcoin? Answering this question might get a bit technical, but I will explain it in a simplified manner – I will try my best!
Above is a daily chart of Bitcoin. As you can see, it shows when Bitcoin peaked in late 2017 and the current trading price at $6323. I have also highlighted a vital price zone with a green triangle. This is called the demand zone.
Back in February 2018, when Bitcoin dropped to $6100, we saw a sharp reversal. This is due to the high demand and prices traded as high as $12,000 in March 2018. The drop started again and again and again through the year with few bounces here and there. However, there is one thing that screams to me in this chart, and that is – every time Bitcoin falls and trades around $5900-$6100 a reversal happens.
So what does this tell us? Very simple. Bitcoin current demand price is at $5900-$6100. This is the price where myself, you, investors, traders, Bitcoin believers, etc. strongly believe that this is the fair value of Bitcoin. But does that mean a reversal will happen now? Not necessarily. I’m pretty sure another question came to your mind. Does that also mean Bitcoin will not fall under $5900? Again, not necessarily. Confusing right?
To simplify it, keep these ideas in your mind:
- Bitcoin demand price (or zone) is currently at $5900-$6000
- The more the price hits the demand zone at $5900-6000, the demand will decrease over time
Now that we covered point 1 in depth let’s have a look at point 2. So, what do I really mean when I say Bitcoin’s demand will decrease over time? No, I don’t mean this is the end of Bitcoin.
But let’s assume I had $100k and wanted to buy Bitcoin at $6000. The first time Bitcoin hits $6000; I will only get 50% of my order filled. This is because a lot of other traders are placing their orders at the same price and we don’t get our wallets filled from the first time.
The second time I will get 70% of my order filled and eventually over-time I will have all the Bitcoins I wanted to purchase. Therefore, now I’m left with no more money. This is precisely what is happening every time Bitcoin hits $6000. Eventually, investors and traders will run out of cash, if the supply keeps rolling in.
So what could happen if Bitcoin actually drops below $5,900 and breaks its demand zone? Bitcoin will simply go to find the next demand zone until there is no supply left (which eventually moves Bitcoin price higher).
When will Bitcoin rise?
This brings us to the second question, when will Bitcoin rise? No one in this industry could give you an exact answer, because no one really knows. Thus, Bitcoin could provide us with indicators and tips on the next expected move, here are some:
- To start a new trend (movement to the upside), Bitcoin needs to make new higher highs.
- This means we need to break out from $7000 and start trading above this price without breaking any critical support levels.
- Current support level is at $5900-$6000
Demand does not grow overnight
As shown below, Bitcoin raised from $100 to $770 between May 2014 and Dec 2014. This means a raise over 600% in less than 7 months! After that, the price dropped over 85% and took over 700 days for Bitcoin to recover and reach $770 (Dec 2014 highs). Therefore, demand does not grow overnight!
So what really happened in those 700 days that lead prices to move up again? We saw some of the above-listed indicators such as higher highs. But, let’s also look at some fundamentals too:
|Number of wallets||15.8 Million||17.4 Million||+10%|
|Bitcoin hash rate||286,384,627 Gh/S||789,710,965.71 Gh/S||+175%|
As shown in the above table, Bitcoin wallets increased by 10% between 2014 and 2015. However, the biggest jump of change is the average daily volume which raised by over 5500%. This gives us an idea of some of the fundamentals we need to track today to see if Bitcoin is actually ready for a reversal or not. All of the above criteria screams one thing in 20 languages – Bitcoin adoption!
How long until mainstream adoption?
Andreas M. Antonopoulos is known as the open blockchain expert, best-seller author, speaker, and educator. In the below video, he explains bitcoin mainstream adoption. Please spare 5-min to watch the Bitcoin Q&A session where he covers how long it will take for the mainstream to adopt Bitcoin’s idea.
I hope you found this article useful. The main idea I wanted to share is that adoption is very important, otherwise, there is no value in a technology that no one uses. Plus, demand does not grow overnight.
If you have any further thoughts that you would like to share in this article, please feel free to send me an email at [email protected]