#forecast 014 : Moving past the second great consolidation of 2021

Dear subscribers,
Welcome to The Bitcoin Forecast #014.
In my last letter, the price was forecasted to consolidate sideways before a bullish breakout to explore new all-time-highs over 1-2 week period. Now two weeks and one day later this has correctly played out (one day late). Bitcoin is now breaking past all time highs as I write.
Top level summary for 13th March 2021 (current price $59.7k):
Bitcoin saw significant “buying the dip” by long term investors. Already 6% of the available supply moved into investor wallets at prices above $1T market capitalisation giving strong validity to Bitcoin as a trillion dollar asset.
Short term: Capital flows continue to show strong demand. Bullish price action is expected for the weeks ahead with some resistance at $63k and the next major resistance at $74k.
Long term: Bitcoin is undergoing the largest supply shock in its history, the steep price rise seen so far in 2021 has been supported by strong fundamentals. My macro top target has now increased to ~$300k (previously ~$250k).
All the best, till next time.
-Willy Woo

Analysis Breakdown

Buying demand remains strong

The last 3 weeks has seen significant flows of BTC leaving exchanges, this is a sign that long term investors have been buying the dip aggressively. This bullish flow, which is still continuing, is stronger than the buying we saw in the mid-January dip.
These coins have been moving at a increasing rate to investors with little history of selling, i.e. “strong hands”.
Red bars measure the coins moving to HODLers with little history of selling. (Glassnode:  live chart)

When I see signatures like this in the charts, it’s indicative of high net-worth individuals and institutions buying who favour cold storage over leaving coins on exchanges (normally seen with new retail investors). Seetee and Meitu announced purchasing $58m and $18m during this dip, I suspect others will announce soon.
In short, this break of all-time-highs is strongly supported by fundamentals.

$1T capitalisation is gets validation

The chart below (Glassnode’s URPD metric) looks at the distribution of coins inside wallets at the price that they entered.
With the strong buying we’ve seen this last 3 weeks we’ve formed a very strong support band.
16% of the available coin supply moved to new wallets inside this $46k – $58k price range giving these price levels immense validity in the price discovery mechanism. Already 6% of the available supply has been bought at values above $1T valuation.
There is a very strong case that price will not move below these levels again, cementing Bitcoin permanently as a $1T asset bucket.

Macro: Bitcoin’s supply shock continues

In Bitcoin’s 12 year history, there’s never been a supply shock quite like what we are seeing right now. Inventory on spot exchanges have been depleting for 13 months, I’ve marked in the chart below the prior depletion event in 2016 which lasted only 5 months; by the way, that 5 month depletion was the prelude to driving the 2017 bull market.

Glassnode:  live chart

Here’s another view of it below using Glassnode’s liquid supply metric, which shows the coins held by investors who behave more like traders with a history of both buying and selling.

These speculative coins are slowly depleting, moving to strong hands who are locking the supply away.
It’s this unprecedented supply shock that’s driving the price action in a very steep climb. While technical analysis may show this rate of climb as overheated, on-chain fundamentals are demonstrating it’s not.

Where are we in the macro cycle?

Let’s revisit the Top Cap model, which uses a moving average method to find Bitcoin’s market tops. At the current trajectory, we’re looking at ~$300k by the end of this year. Previously, at the start of the year, it was tracking towards a ballpark of ~$250k.

The red line in the lower pane of the chart gives us a progress readout on Bitcoin’s price path towards the macro top.

Medium term price targets

Once again, I’ve included below Fibonacci Price levels which readers may find useful as price targets. As Bitcoin continues to make new highs, these Fib levels are the only resistances we can use as there’s no prior history of price discovery at these prices.

$63k is the next resistance, but given the strong consolidation we are breaking out of, coupled with solid investor demand, I don’t think we’ll pause much until $74k in the weeks ahead.