Bitcoin (BTC) has been struggling to break the $50,000 mark for over 10 days now. However, on Sept. 2, the premium cryptocurrency briefly surpassed the milestone, sending positive ripples across the market. Since then, the token has dropped below the mark to trade in the $49,000 range before rebounding to hit the $50,000 mark yet again on Sept. 3.
As Bitcoin often behaves in a cyclical pattern, a look at the monthly trends for September could reveal patterns in the price, which in turn could be helpful to gauge the outlook for the upcoming month. Historically, September has been one of the more lackluster months for BTC. A look at the monthly price data since 2013 reveals that the token has posted positive gains in September twice in eight years — in 2015 and 2016 — with a maximum of 6%, which could be considered to be almost flat.
Pete Humiston, manager of Kraken Intelligence — the research department of the Kraken exchange — told Cointelegraph about what this trend could mean for this year:
“September is historically Bitcoin's worst-performing month. That said, it has been verging on $50,000 for the past three weeks or so now. Should Bitcoin stage a breakout above this psychologically significant milestone, it could renew investor interest and spark the momentum needed to carry it all the way back to $60,000.”
In fact, BTC has posted red in September in four of the last five years, making it the bleakest period for the coin. However, the $50,000 mark is considered to be one of the significant resistance levels for this asset ever since it broke the barrier just days after Tesla’s CEO Elon Musk announced that the company had bought BTC worth $1.5 billion on Feb. 8, along with starting to accept Bitcoin as a payment method. The token briefly going past this resistance level at the onset of this month could be a positive sign for the asset.
Cointelegraph discussed the current scenario with Hunain Naseer, senior analyst at OKEx Insights — the research team at cryptocurrency exchange OKEx. He said, “As things stand today, BTC's struggle under $50,000 is the big fight bulls need to win before we can look at $60,000. The move from $50K to $60K is likely to be much faster than the current move between $40K to $50K.”
S2F model sees lesser deflection
Twitter user PlanB’s stock-to-flow (S2F) model has been one of the most accurate quantitative models that attempt to evaluate and forecast the price of Bitcoin. It does this based on the supply injections of the asset into circulation in a certain period. According to the model, the price of Bitcoin is supposed to have gone past $100,000 to exchange hands around the $105,000 mark.
However, BTC is currently recovering from a larger deflection from S2F at the end of July when it seemed like the model could be invalidated. This is not the first time that the price of Bitcoin negatively deviated from the model. The deviation began at the end of October 2018 and lasted until mid-June 2019 for a duration of nearly seven months. In comparison, the current ongoing negative variation has lasted only about three months. It is noteworthy here that for the rest of the year, the S2F model is considerably flat and forecasts a similar range at the beginning of the fourth quarter.
Naseer further discussed the model's forecasts in comparison to the market price, saying, “Given the current sentiment and long-term fundamentals, it is not out of the question for BTC to hit $100K by December, especially since October and November have historically been big months for Bitcoin. They could easily set it up to touch $100K by mid-December before any corrections.”
Concerning this model, Jake Wujastyk, chief market analyst at TrendSpider, a technical analysis software company, told Cointelegraph, “Based on using the measured move from the March 2020 low to the October 2020 candle (seven months), applying this measured move to the June 2021 low would put this right around $100,000 by the end of the year, assuming the move is the same.”
Even though the S2F model has been highly accurate in forecasting the price of Bitcoin until now, it is important to note that all technical indicators have their limitations. Humiston spoke more on the broader perspective of the cryptocurrency market, saying, “A move to $100,000 in four months would require a significant inflow of capital. While certainly not impossible, it seems improbable now that investors' attention has turned to alternative crypto assets such as Ether, Cardano and Solana.”
Altcoin boom may prevent $100K BTC this year
While Bitcoin has been slowly creeping towards the $50,000 mark and, in fact, struggling to hold it currently, altcoins like Ether (ETH), Cardano (ADA) and Solana (SOL) have been on an absolute tear in the last few weeks.
According to data from CoinMarketCap, in the previous seven days at the time of writing, BTC has posted 6.40%. In comparison, altcoins have dwarfed these numbers, with SOL posting 73.83%, ETH posting 26.57% and ADA posting 15.97% in the same duration. SOL and ADA have recently posted new all-time highs as well in September.
This altcoin boom has put the Bitcoin Dominance (BTCD) Index down to 41.46% at the time of writing, according to data from TradingView.com. This is similar to the levels it had reached back in June 2018. The CEO of crypto exchange KuCoin, Johnny Lyu, told Cointelegraph:
“It is important to understand how ETH and other altcoins are able to compete with BTC for the money of new investors and how those who have been on the market for a long time can behave[...] Crypto mass adoption cannot be achieved without the prosperity of altcoins. Many market participants believe that at the current price level, it is the value of altcoins that is more prone to a multiple increase.”
The price of Solana, for example, has grown more than 100 times since the beginning of the year. Even PlanB’s optimistic S2F model for BTC forecasts its value to be just over $100,000 by the end of the year, only three times the token’s value at the beginning of the year. Such vast differences in returns could even push investors to choose altcoins as their investment vehicle over Bitcoin.
However, the institutional interest in Bitcoin is seeing an upwind as compared with the levels seen in June and July. Microstrategy made yet another purchase of BTC on Aug. 24, this time worth $177 million. This amounts to a total of 105,085 BTC, valued at $5.2 billion currently and is 0.5% of the maximum supply of 21 million BTC.
Even one of the most prominent financial institutions globally, Citigroup Inc., is considering trading Bitcoin futures offered by the Chicago Mercantile Exchange, the largest derivatives exchange in the world. According to the recent report, the banking firm is waiting for regulatory approval to trade in this derivatives instrument.
Lyu further talked about how the growth of the cryptocurrency market as a whole is renewing institutional interest in the industry, stating, “The gradual recovery of institutional interest in cryptocurrency is already obvious. Positive news about SpaceX's investments in Bitcoin, the network upgrades of Ethereum in August and Cardano in September — all of this neutralizes the bear market of May and June and strengthens the confidence of market participants in further growth.”
Wujastyk also suggested that the price movements that Bitcoin has made over the last few months require the injection of large amounts of capital to move the market, which indicates that institutional capital is definitely involved. This market momentum that currently exists for both Bitcoin and altcoins could be the differentiating factor leading to a historically dreaded month for the cryptocurrency market.