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Current Tether Supply Suggests Bitcoin Price Is Correcting to $20,000


cointelegraph.com 2019-08-12 22:00
Reading time: ~6 m

Bitcoin price charting on a longer timeframe, market structure and the issuance of 1 billion Tether so far this year are making crypto and equities analyst FilbFilb incredibly bullish on BTC/USD in the run up to the 2020 halving. 

Bitcoin traders split into 3 groups 

Since correcting from 2019’s all-time high of $13,800 and thrice failing to break above $12,500, crypto investors broke into three camps. 

The first took the bearish perspective and predicted a pullback to $8,500-$7,500, often citing the CME gap. 

The second envisioned a lengthy period of consolidation where Bitcoin price would remain pinned between $9,000 and $12,000, providing the opportunity for savvy traders and institutional investors to accumulate prior to the 2020 halving. 

The third group interpreted the parabolic breakdown as nothing more than a blip and remain steadfast in their belief that the digital asset will eventually rally back to $13,500 and higher. 

4 ways Bitcoin price structurally shifted in 2019

According to popular crypto and equities analyst FilbFilb, Bitcoin price has undergone a structural shift for several reasons, he explained in his weekly newsletter. 

Namely:  

  • The digital asset is consolidating near $11,800 (a resistance formed in Q1 2018) after bouncing off the double bottom at $9,500. This level now serves a strong weekly support and FilbFilb believes consolidation below resistance is a bullish indicator. 
  • Bitcoin has broken above $12,000 four times in separate weeks over the last seven weeks and the price action within this zone is different from Q1 2018 as all attempts to surmount $11,800 were met with swift rejection. 
  • Bitcoin’s market structure represents a bullish pennant with a “minimum target” aligning with the next important weekly resistance at $16,000. According to FilbFilb, this is a “multi month pennant, which is supported by the back breaking rejection of the lows found in 2018.” In 2018, retests of $12,000 consistently broke out the downside, where as in 2019 Bitcoin price action appears likely to make a strong upside move over the coming weeks. 
  • The VPVR shows a void in price history above $12,000 and a sharp upside move to $14,000 would open the doors to price discovery. It’s unlikely that a move to or above $14,000 would induce selling as those holding a position at this level are probably not looking to sell. 

A break above $14,000 also represents a new 2019 all-time high and the news event surrounding this event could lead to an influx of capital from investors of various ilk. 

In combination, these factors make a strong bullish case for Bitcoin price in the run up to the May 2020 halving. 

Tether issuance does not immediately impact market 

However, FilbFilb also cautions that: 

“On lower time frames, the Adam and Eve target remains to play out, with $12.9k being the target.” 

FilbFilb

As discussed previously, there is a noticeable lag between Tether issuance and Bitcoin’s corresponding price action. 

By starting at Tether’s market cap bottom and comparing this against the time it took Bitcoin to reach its 2018 bottom, FilbFilb’s notes that there is an approximately 32-day delay between Tether and Bitcoin’s price action. 

Mind the gap

By anchoring Tether’s market cap bottom to Bitcoin’s market cap bottom, the 30-day lag between the two assets is smoothed out to the extent that it is easier to determine the correlation between each asset. 

Bitcoin price

Using Y=0.0002x+1.161, FilbFilb concluded that the correlation between Tether and Bitcoin is 0.89. 

Therefore, when applied to Tether’s current market cap of $40.04 billion, the model suggests that the price of Bitcoin should be somewhere around $20,000. 

When the same calculation is used without the 32-day re-anchoring, the result was still a 0.8 R-squared. Y=0.0003x + 0.9695 gies a BTC valuation of $13.500, which according to this year’s all time high, isn’t too far off the mark. 

Bitcoin price

Correlation between Bitcoin and Tether statistically significant 

Admittedly, there are a few caveats which the analyst sufficiently addresses: 

  • The Tether / Bitcoin analysis is solely reliant up data from 236 days and correlation does not a pure determination of causation. 
  • Similar to other stablecoins, issued Tethers could be burned at any moment. 
  • More Tethers could be printed at any moment, and USDT does not represent the entire crypto market supply of stablecoins. Furthermore, Tethers are used for more than simply purchasing Bitcoins.
  • If Bitcoin’s market cap continues to grow, the formula and analysis will require adjustment as the current 1 billion Tether issuance’s impact on a $70 billion Bitcoin market cap will have a different impact on a larger or smaller Bitcoin market cap. 

Ultimately, what is worth noting is that there is a statistically significant correlation between Bitcoin price and Tether’s market cap. 

Bitcoin price

Thus, one can infer that Bitcon’s price could be correcting upwards from its current value of $11,500 given the market cap of Tether and the 1 billion in USDT issuances this year. 

“An additional $1 billion market cap could potentially move price by around $5K USD,” adds FilbFilb.  

But while FilbFilb cautions that he is not comfortable making prediction of a $20,000 Bitcoin price today, he is confident that: 

“There’s statistical evidence to suggest that there are enough Tethers in issuance to make a directional move towards it, should they get deployed in that way.”

Macro-economic factors support the case for a bullish Bitcoin

As previously reported by Cointelegraph, a series of worsening macro-economic factors are presenting challenges for traditional markets. But these issues also appear to be supporting Bitcoin’s allure as a store-of-value investment and hedge against market volatility within traditional markets. 

Bitcoin’s growing correlation to Gold, China’s yuan devaluation, Brexit, global monetary easing on part of numerous central banks, and negative bond yields are all driving investors to view Bitcoin as a hedge against volatility.

As Cointelegraph reported several weeks ago, Digital asset research firm Delphi Digital found that the current macroeconomic landscape is creating the “perfect storm” to ignite Bitcoin price appreciation.

“The relative size of Bitcoin’s market value compared to the investible gold market, for example, makes it a tempting opportunity for investors starving for assets with above-average growth potential as well,” the researchers note. 

Therefore, it’s no surprise that investors may be increasingly turning to Bitcoin — and Tether as an easy way to access this digital gold — in the coming months as storm clouds continue to gather over the global economy.


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