Elon Musk, $40K and no demand: 5 things to watch in Bitcoin this week
Bitcoin (BTC) starts a new week on a pleasant high thanks to a boost from a familiar source, Elon Musk. Are the good times back?
After spending weeks languishing close to $30,000, Bitcoin has managed to stage a sustained comeback to line up an attack on major resistance.
With on-chain indicators flashing bullish, there may be a chance of a breakout, but analysts and traders are far from 100% convinced.
Cointelegraph takes a look at five things that could influence how BTC price action unfolds in the coming days.
Musk tweet changes the game… again
The talk of the town, once again, is Tesla and SpaceX CEO Elon Musk this week.
Firmly out of favor after playing the devil’s advocate on Twitter on multiple occasions, Musk returned to the fray with news that previously seemed unlikely.
Tesla dropped Bitcoin payments earlier this year shortly after announcing them and without actually processing any BTC transactions. This, according to Musk, was due to the allegedly unsuitable energy usage involved in mining.
Widely criticized for both his logic and its impact on Bitcoin price action, Musk did not give up, with subsequent tweets on various aspects of Bitcoin and altcoins producing discernible but comparatively muted price movements.
Now, it appears the self-proclaimed “Technoking” has tweaked his social media approach once more.
Responding to a complaint from Magda Wierzycka, CEO of financial services company Sygnia, he reopened the door to Tesla adopting Bitcoin once again. Wierzycka’s criticism of Musk’s Bitcoin impact was covered by Cointelegraph last week.
“When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions,” Musk responded, adding that Tesla still had 90% of its initial $1.5 billion BTC purchase.
BTC/USD relished the news, climbing past $39,000 to seal daily gains of over 12% at the time of writing.
Indicators produce mixed narrative
As Cointelegraph reported over the weekend, bulls’ case is being supported by a host of on-chain indicators.
Covering price versus active addresses, spent output profit ratio (SOPR) and stock-to-flow, analytic tools firmly point to an undervalued Bitcoin at current prices.
As such, predictions of a comeback in the short to mid-term are creeping in — one calls for $85,000 within the coming months, while stock-to-flow model creator PlanB still believes that $100,000 is plausible this year.
On Monday, meanwhile, there are two other charts to consider — and one is a less frequent visitor than the other.
Related: VORTECS Report: When this indicator lights up, LUNA, MATIC and EGLD usually gain 10%
As noted by PlanB among others, Bitcoin’s mempool has seen a major reset this month, which means transactions are currently extremely cheap versus expected processing time.
Not only is this a “great time” to reorganize and consolidate one’s BTC wallets, but as Cane Island Alternative Advisors investment manager Timothy Peterson argues, the mempool is now back where it was before Bitcoin began its parabolic rise in late 2020.
“The bitcoin mempool is a good indicator of bubbles,” he summarized in a series of tweets on Sunday.
“The mempool is where pending transactions wait to be processed before being added to the blockchain. This week it has cleared out for the first time since Nov 2020 (pre-bubble).”
Continuing, he warned that the lack of demand that the empty mempool reflects means price action “should” trend down in the coming months.
This lack of demand meanwhile has become plainly noticeable on exchanges. As highlighted by on-chain monitoring resource CryptoQuant, both inflows and outflows from exchanges are down considerably.
— CryptoQuant.com (@cryptoquant_com) June 14, 2021
The $40,000 battle is on
Traders waking up on Monday will be interested in one level in particular thanks to Bitcoin’s latest run-up.
Having waited for a decisive move during weeks of price compression, there is now a real chance that they will witness an attack on $40,000 and potentially higher.
This would be significant in itself — estimates broadly call for lower prices in the short term before a rebound, but Bitcoin has so far refused to conform.
“Should do 1 more leg up before I expect some correction,” popular trader Crypto Ed said on Monday morning.
“For now I only see an intra day trade set up on low TF.”
He added that he would be waiting for lower levels to hit before a possible entry trade, but that in the meantime, BTC/USD could hit as high as $47,000.
Shorters came in for mockery, with Crypto Ed noting many would already be at a loss or liquidated against a backdrop of bullish sentiment and MicroStrategy about to purchase another $500 million of BTC.
“How does that feel? Being underwater in your short position and realizing Saylor is ready to go for a new $500mm shopping spree?” he added, referring to the company’s CEO, Michael Saylor.
At the time of writing, BTC/USD circled $39,500 after hitting local highs of $39,783 on Bitstamp.
Fundamentals reflect miner disarray
Away from on-chain, Bitcoin network fundamentals meanwhile look slightly less solid.
As the Bitcoin energy debate rages on, miners continue to face pressure from China in particular, where a shakeout of who is allowed to mine using local energy is underway.
Some see this as a crackdown and even ban on Bitcoin’s major mining power source, while others argue that miners, as ever, will simply adapt to the changes and move elsewhere. This could also result in a transfer of hashrate dominance to another jurisdiction.
El Salvador, the first country in the world to make Bitcoin legal tender, is already working on its own geothermal mining facilities, becoming the latest party in the so-called Bitcoin hash war.
So far, however, the trend is down. According to monitoring resources, Bitcoin’s hash rate is shrinking, with 10 exahashes per second (EH/s) wiped off in recent days.
Since the hash rate is an estimate, different sources have different numbers, with the current 113 EH/s representing roughly two-thirds of this year’s 168 EH/s all-time high.
Difficulty meanwhile decreased by 5.3% on Sunday, with another decrease on the cards for the next automated readjustment in two weeks’ time.
Related: Bitcoin price moves toward $40K as on-chain and technical analysis favor bulls
Volatility says the top is NOT in
Finally, for one hedge fund manager, there is nonetheless no sign of a Bitcoin price top.
Alongside data from Bloomberg Intelligence, Dan Tapeiro, founder and CEO of DTAP Capital, volatility is simply too low to suggest that this is a local ceiling.
“Bitcoin has never topped with volatility this low. Massive upside still ahead. Twtr sht termers too negative,” he said in part of a Twitter discussion on Monday.
He added that despite Saylor and MicroStrategy, corporate adoption in the United States was “unlikely,” but that Bitcoin was still the “biggest macro event of all time.”
Countries like El Salvador, in addition, have huge potential to stage copycat moves.
Tapeiro drew attention to Bloomberg’s assertion that $100,000 in 2021 would be a “meager” target for BTC/USD.
