Is 10.5k the Bitcoin resistance point?

If you’re a Bitcoin (BTC) owner, you may have been disappointed to see it fail to stay across the $12,000 mark, and it has dropped to hover between $10,000 and $10,500 during the past week.

As Charles Bovaird says in one of his most recent posts about the Bitcoin price, “In this time, the digital currency has failed to reach $10,500, and while it has fallen below $10,000, it has failed to stay below this level for long.”

So, what does Bovaird make of what is happening, and I should say that I follow his analysis of this market, because it has always proved to offer balanced information.

What Bovaird asks is this: is BTC encountering “significant resistance” at $10,500?

According to those he interviewed, the answer to that is yes. Why is it happening?

In the opinion of Kiana Danial, CEO of Invest Diva, “Bitcoin has found a short-term resistance at $10,500 which has acted as resistance multiple times in the past, including in June 2020, February 2020, and a number of times in 2019.” She also adds, “A break above $10,500 could open doors for further gains towards $11,150, while a break below $10,000 (the lower band of the current range) could lead to a revisit of the lows of back in July at around $9,300.”

John Todaro at TradeBlock is of a similar opinion. “Yes, we are facing resistance at $10,500,” he stated, adding, “$12,000 has proven to be a difficult ceiling to break through.”

Joe DiPasquale, CEO of cryptocurrency hedge fund BitBull, commented, “Bitcoin is consolidating in this range for now with support at $10K and resistance at $10.5K.” 

He also says, that if BTC doesn’t fall beneath $10,000, then we may see a retest of $10.5k. But if it does fall, to say $9,800, then we’re likely to see $9.5k shortly after.

But not all agree that BTC is facing resistance at $10,500. Marouane Garcon, MD of crypto-to-crypto derivatives platform Amulet, said, “I would say that $10,000, which was a level of resistance, is now the support and in this obvious accumulation phase, we’re testing that support level.”

Do you have any thoughts about what might happen to the price of Bitcoin in the next few months, and what events might affect it to raise the price, or cause it to fall?

The Covid-19 Crypto Craze

You might have noticed when you checked the price of Bitcoin (BTC) on 27th July that it had tipped over the $10,000 point and is continuing to rise. It was pretty unusual for a Monday, as there is usually a dip after a weekend. Not so in July..

Ron Shevlin is just one of the fintech writers and Snark Tank analyst who saw this shift as ‘The Coronavirus Crypto Craze’. He asked, “Where is this Coronavirus-fueled trading volume coming from and who will drive the future growth?” It was, and still is, a good question.

According to Cornerstone Advisors, 15% of Americans now own crypto in some form, and just over half of these people invested in cryptocurrency for the first time during the first six months of 2020. Furthermore, these new investors obtained roughly $67.5 billion in cryptocurrencies, averaging out at around $4,000 per person. 

This new penetration in the USA brings it into the Top 10 countries when it comes to crypto ownership, although it still has surpass Turkey (20%) Brazil and Colombia (18%), Argentina and South Africa (16%).

Who is buying crypto?

But what we all want to know is this: who has been on a BTC buying binge during the months when the pandemic forced people to stay at home across the world. Although, of course, if you’re at home, that’s the perfect place form which to buy crypto.

High-income men with postgraduate degrees account for eight in 10 buyers, and have an annual salary of around $130,000. Then there are the Millenials and Gen Xers. Millennials (26 to 40 years old) comprised 57% of the consumers buying cryptocurrency in 2020 with Gen Xers (41 to 55 years old) accounting for 30%. Baby Boomers hardly feature accounting for only 3% of crypto consumers, and Gen Zers are similarly thin on the ground at 7%.

Significantly, the majority of buyers are customers of traditional banks rather than the new digital challengers, which is surprising. Shevlin reports, “Of the consumers buying cryptocurrencies during the Bitcoin binge, almost half—47%—are customers of Bank of America.” By contrast only 6% of the 2020 BTC buyers use a digital bank as their primary bank.

Financial health and first time buyers

Another interesting revelation from the study is, “44% of Americans who have already invested in Bitcoin and other cryptocurrencies said that their financial health is “much better” since the beginning of the Covid crisis,” whereas only 5% of all other US consumers agreed with this statement.

The first time investors are an interesting group. In some ways similar to established crypto owners, they differ in one respect: they’re changing up the financial institutions they do business with.

Half of the first timers switched their primary banking relationship in the past six months—one-third did so in the past three months alone.

The key takeaway from all this is, as Shevlin says: “

 All banks—in particular, community banks and credit unions—should look at opportunities to provide Bitcoin wallets and other cryptocurrency trading services as a way to differentiate their services.”

Is 2020 the year for Bitcoin at $20,000?

According to a recent Bloomberg analysis, we can expect bitcoin to return to the heady days of 2016 and hit the $20,000 mark again, writes financial analyst Charles Bovaird.

The Bloomberg Crypto Outlook said, “Bitcoin is mirroring the 2016 return to its previous peak. That was the last time supply was halved, and the third year after a significant peak.”

It also suggests, “Bitcoin will approach the record high of about $20,000 this year, in our view, if it follows 2016’s trend.”

Most predictions about the value of Bitcoin depend on tracking its behaviour in the past. For example the Bloomberg report also notes, “After 2014’s 60% decline, by the end of 2016 the crypto about matched the 2013 peak.”

Naturally, any prediction about the leading cryptocurrency elicits a response from many other analysts. Bovaird remarked, “After this forecast was made, several analysts weighed in, with many stating that while bitcoin may very well reach $20,000 before 2020 is through, it will be for different reasons than the ones outlined in the Bloomberg analysis.”

There are those who emphasise the effect of the halving, which sharply reduced the rate at which new supply enters the market, while others pointed to “expectations of future demand as potentially pushing the digital currency’s price higher.”

There are a few who are firmly behind the Bloomberg prediction, such as Alex Mashinsky, CEO of Celsius Network. He told Bovaird, ““I’ve been talking about this 20k number since January,” saying that there are two key structural factors that should drive the price upwards.

Mashinsky is of the opinion that the halving in May is placing “tremendous deflationary pressure on bitcoin, and at the same time, we see a dramatic increase in the number of new people signing up and buying bitcoin.”

Furthermore, he added, “Increased demand, decreased supply beats out all the noise in the system and that will help us see these new highs in 2020.”

Eric Ervin, CEO of Blockforce capital also supports 20k this year for Bitcoin. He said “the significant amount of fiscal and monetary stimulus and the possibility of rampant inflation on the horizon. If you couple that with the relatively small market cap of bitcoin it becomes easy to see that we are at a tipping point.”

Ervin remarked on the fact that central banks are printing money at unprecedented rates and that this is part of the reason: “The fundamentals are lining up for a potentially explosive rally in the price of bitcoin.”

Others, such as Michael Conn co-founder of Zilliqa Capital, suggest that the big price rise will be supported by other activity: “I feel it will have a chance of approaching the $20k level because of fundamental growth in usage of the peripheral ecosystem.”

However, John Todaro of TradeBlock is less optimistic about $20,000, he said, “It’s certainly possible, but as of now there still remains considerable overhangs across financial markets as well as ongoing regulatory challenges to the space which could limit that trajectory from playing out as before.”

Are crypto exchanges poised for a growth explosion?

What will the financial sector look like in 2030 after spending the decade challenging the incumbent financial services? Leeor Shimron, a Forbes Contributor, believes that crypto exchanges are poised to capture the growth in this space.

To date, crypto exchanges have provided users with a first contact point with an ever-increasing range of crypto assets. Lets’ not forget that the first crypto enthusiasts were retail investors who for the first time were able to access a new asset class before the institutional investors. As a result, most exchanges, such as Coinbase and Binance, were set up to service demand from the retail investor. For example, as Shimron remarks, “In just 8 years, Coinbase propelled crypto to the mainstream serving over 30 million users.”

Follow the Internet’s history

There have been several commentators who have suggested that the crypto story is very similar to the emergence of the Internet. The Internet was a fundamentally disruptive and paradigm shifting technology, and crypto very well may exhibit similar changes, mimicking the growth in Internet usage.

Illustrating this claim, Shimron cites the statistics: “User adoption of the internet reached 10% of American households in 1995, five years after the first web browser was launched. User adoption reached 50% in the U.S. by the year 2000.” Currently, US adoption of crypto is at around 5%, and hasn’t seen the same rate of adoption as the Internet. This is caused by “issues of scalability, privacy, and ease of use,” something that the Internet also had to overcome.

However, if Bitcoin’s growth story follows that of the Internet, it should achieve user adoption of between 20–50% by the year 2030.

Crypto exchange growth

Shimron applies a similar metric to exchange growth. He writes, “To project future exchange growth in the U.S., I assumed 5% user adoption of crypto in the US currently and calculated revenue growth if user adoption reaches 10% (conservative case), 20% (base case), and 50% (optimistic case) in the year 2029.”

The resulting scenarios for 2029 in terms of exchange revenues are: “$1.9 billion in the conservative case, $3.8 billion in the base case, and $9.6 billion in the optimistic case.”

He also remarks that although the 50% adoption may seem far-fetched, there are indicators supporting it, including ample growth potential amongst retail investors and demographic changes over the next decade, with more 18–39 year olds living in cities and being more familiar with digital technologies and virtual goods. These millennials will also inherit $68 trillion from the baby boomer generation by 2030, and they are looking for new ways to generate yield and store their wealth.

So, the future for crypto exchanges is bright, “as new use cases and killer apps emerge,” alongside retail users flooding the market and exchanges capture this growth.