Big whales lead liquidity tightening, Bitcoin may reach $50,000

As more and more institutions accumulate Bitcoin due to concerns about dollar-related inflation, Bitcoin could reach $50,000 in the coming time.

The largest cryptocurrency by market cap recently surged above Facebook and Tesla, retreating from a record high of nearly $42,000. However, its plunge prompted wealthy traders and institutions to buy it again at lower prices, leading to a liquidity crunch that further exacerbated its limited supply cap of 21 million.

Bitcoin’s price has been mostly sideways, forming a symmetrical triangle structure. Looking back, the above pattern is formed when the price forms higher lows and lower highs. At the same time, the trading volume decreases. Eventually, the price breaks out in the direction of its previous trend (either up or down).

The previous trend of Bitcoin was bullish. Therefore, as the cryptocurrency breaks out of the triangle pattern, there is a higher probability that it will rise again. That should take its price above $50,000.

Once again, it’s because of the textbook description of a symmetrical triangle. An asset’s breakout is as much as the maximum height between the pattern’s upper and lower trendlines. In Bitcoin’s case, that spread is around $14,000.

Bitcoin’s triangle consolidation pattern Source: TradingView.com

The triangle consolidation, coupled with the increase in trading volume, predicts that the price of Bitcoin will exceed $50,000 in the future.

Bitcoin liquidity crisis

Fundamentally, the price target looks achievable, at least according to numerous analysts who determine their market bias based on on-chain metrics. For example, data analysts at Glassnode highlighted Bitcoin’s largest liquidity drain yet in recent weeks, suggesting a bullish bias for the cryptocurrency.

“Not only are funds being withdrawn from exchanges, but Bitcoin is also being moved around,” he said. “In the past 30 days, approximately 270,000 BTC has moved to addresses of entities considered to be HODLers.”

Changes in Bitcoin’s liquidity supply Source: Glassnode

“The Glassnode chart may be more important than the price chart: Bitcoin supply is being withdrawn from exchanges at an unprecedented rate,” added independent market analyst Luke Martin. Historically, bull cycles have ended after the change in exchange supply turned positive. This shift has not yet occurred.”

US dollar quantitative easing

Part of the reason is that demand for Bitcoin is relatively high amid ongoing anti-inflation rhetoric. The likelihood of Joe Biden’s ascension to the presidency of the United States raises the prospect of additional government spending to protect the economy from the impact of the coronavirus pandemic.

This means a large supply of dollars, which many people believe is a weak dollar.

Such concerns have already forced companies like MicroStrategy and Square to convert a portion of their dollar reserves into Bitcoin. Meanwhile, legendary investors like Paul Tudor Jones and Stan Druckenmiller have also invested small amounts of money in the cryptocurrency market, both of which believe it is a better version of gold.