First leaked as a Twitter TWTR post by user ClassicMacro, CitiFX prepared a bitcoin (BTC) technical analysis for its institutional clients and projected a potential high of $318,000 by December 2021. While this may seem unlikely, if attained, it will be the weakest rally—a 102× increase from low to high.
Bullish periods have been increasing in length: ten months in 2010 – 2011, two years in 2011 – 2013, and three years in 2015 – 2017. Tom Fitzpatrick, head of CitiFX financials, submits the correction period after the last two runs remained stable for about 12 months. This analysis indicates we are now in the midst of a bitcoin bull run that started in early 2019. If correct, the run is on target to end late 2022, a total of four years.
Some believe this extended run will result in new highs and chart “what looks like a very well-defined channel.” Based on this, Fitzpatrick has predicted $318K, though he concedes the number seems highly improbable.
The United States Federal Reserve changed its monetary policy at the onset of the coronavirus pandemic and began a vast and sustained increase in new money production. With reduced intent to constrain this production even after the economy and employment begin to recover, investors are considering assets that will not be disturbed by external factors.
According to Fitzpatrick, “bitcoin, like gold, is an asset with limited supply.” The advantage over gold is that it can easily cross borders while obscuring ownership. That central banks are deliberating central bank digital currencies (CBDCs) bode well for bitcoin, mostly because, unlike CBDCs, there is no tie between BTC and fiscal policy adjustments.
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Others note it is not the forecasted price level—moon targets have a low probability of being reached—it’s that Citibank has presented bitcoin favorably to its clients and customers. Some see this endorsement as an indication BTC is indeed strengthening its status as a future viable alternative asset.
In mid-November, BTC set a new record by posting the highest ever three-week close. In the first week of December 2017, BTC reached nearly $20,000, its highest price though its weekly chart closed at just $13,500. At the time, this was an indication BTC was overvalued and the $20,000 an anomaly in the long-term.
Since 2017, the landscape has changed; the market now accepts a higher price for BTC, and the latest tri-weekly candle closed at $15,960. This 18% increase indicates the market values BTC much higher than in 2017. BTC has emerged as a relatively stable and decentralized store of value not governed by any particular country or subject to political policies.
On November 19, US Treasury Secretary Steven Mnuchin said he would not extend the Federal Reserve’s two programs to buy corporate debt and five others that lend money to medium-sized businesses. It is a move that could hamper president-elect Biden’s ability to gain economic support that helps with ongoing pandemic issues.
Vice-chairman of Evercore EVR ISI Krishna Guha called the move a “reckless politicization of market-stabilization policy.” He claimed Mnuchin was ensuring there would be no money left for Biden’s administration.
After the global market rout in March, the programs bolstered financial markets. As traders anticipated two potential outcomes—Federal Reserve backing the stock market and debasing the US dollar with the expansionary policy—equity and other asset risks swelled alongside safe-havens such as gold.
Situated between safe-haven and risk-on per convenience, BTC also surged. From March to November, BTC climbed by as much as 379.21%, in a growth rate that exceeded the S&P 500, gold, and other traditional market rallies.
The possibility of a diminishing assistance program seems to have been bullish for bitcoin. Still, the cryptocurrency climbed another 2% ahead of the London and New York opening bell on Friday, November 20. Other markets did not fare as well. Gold lost about 0.2%, and futures tied to the S&P 500 index fell 0.45%. The US dollar, conversely, rose about 0.04% against other top foreign currencies.
Analysts consider the possibility Biden’s administration will reinstate lending programs after taking office in January. The move would require Biden to launch new loaning facilities alongside the Federal Reserve, citing unusual and exigent circumstances.
To some degree, this clarifies why bitcoin is seemingly resilient at the end of the very facilitator that played a role in propelling it from $3,858 in March to $18,000 in November.
Not everyone is convinced BTC is a legitimate asset in financial markets, and some draw parallels between the cryptocurrency, money laundering, and other illegal activities.
These dissenters emphasize the distinction between digital currencies and underpinning blockchain technology. At the New York Times DealBook Summit, Jamie Dimon, CEO of JPM JPM organ Chase, said bitcoin wasn’t his “cup of tea” while praising the merits of JPM’s blockchain-backed coin.