Where next?

Posted on 14th Mar 2021 by the LSS team

Still a buyer of Bitcoin
For what it’s worth, I am still buying Bitcoin here. In my previous write-up I noted that my base case was a ranging between 45-55K unless a further move up was sparked by stimulus, large institutional buyers or in general easing conditions in traditional markets where both dollar and interest rates had been acting up a little bit. I think at least two out of those three have now taken place causing a short squeeze over the 13-14 March weekend and renewed momentum.

2021 bull cycle expectations for BTC
So where are we at LSS expecting Bitcoin to go? In general my expectation is in line with the likes of respected Bitcoin analysts like Willy Woo or the Stock to Flow model, based on on-chain activity, but also likely repetition of historical fractals. I expect to see $250,000. I have been on the fence about whether we get a repeat of the 2018-19 bear market as there are a number of things that are now fundamentally different. To me that includes the presence of large institutional buyers that I expect will “collar” price action (heavily sell local tops and buy local bottoms) and cause more waves on the way up and down.

Cashing out to what exactly?
In addition, you get a real sense of more and more people understanding that “cashing out” to US dollar or other fiat currencies is in reality cashing out hard money for infinite quantity fiat currency. It is like an Argentinean investor buying US dollars for a few months and then saying “phew, got some nice 50% gains on my USD position, now going back to the safety of the peso”. It doesn’t make sense. A paradigm shift is happening in front of our eyes and personally, if Bitcoin hits $250,000 my mental model will become more “I have something really valuable in hands, would hate to lose it” and less “can’t wait to take profit”. I suspect there are more like me, even at current prices, as evidenced by the slowly declining number of 4 million Bitcoin or so that are actually actively traded and not in some form of cold storage.

Supply and demand are a thing
Having said that, it’s really all about supply and demand and until the next halving event a huge amount of daily buying would be needed to sustain the price at $250,000. My base case based on all of the above is therefore that we go that high, many will be shaken out before then, and when we do hit our eventual peak we will probably see significant drops. -$50K in a day, who knows? The difference I think, will be that while at that point many shall suspect that we sell-off more and repeat 2018-19, in reality the dips will get bought up as trust in the traditional financial and monetary system is eroded more and more.

Weeks ahead
In the weeks ahead, subject to macro conditions, I expect Bitcoin to initially take center stage again and maybe rally to $70-90K before setting in another local top after which we could easily drop to current levels again. At some point or another we will also get a massive alt season again, but it might be 1-2 months off.