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Is Bitcoin Overbought or Oversold?

  • Hedge fund manager Mark Yusko is bullish on the long-term price of Bitcoin.
  • Yusko forecasts that in the short term, there could be a consolidation of the price and warns of a possible reversal.
  • The price of BTC could reach $250,000 in five years and be as valuable an asset as gold.

Bitcoin has gained ground strongly in the last two weeks creating excitement in investors. On Friday, Bitcoin again managed to break the $60,000 barrier for the first time since April and on Monday at 12:13 pm (EST) it was at $62,161. But what’s ahead for Bitcoin?

This upward movement can be explained by the excitement generated by the possible IPO of bitcoin ETFs this Tuesday.

"We're obviously excited that people are acknowledging that approval is likely imminent," 

said Mark Yusko, CEO of Morgan Creek Capital Management.

"We have been bullish on cryptocurrencies, and Bitcoin in particular, for a long time,"

Yusko said in remarks to CNBC. The managing partner of Morgan Creek Digital expects investors to make a profit due to the extraordinary rally in the price of the cryptocurrency.

According to the hedge fund manager, “There are a lot of people who think we could hit $100,000 before the end of the year. The stock to flow model says we should.”

“I also wouldn't be surprised of a little consolidation. Look, we're up 40% this month which is only 15 days old,” 

he predicted. However, Yusko does not believe that BTC can sustain its uptrend for long.

He points out that we must be careful because we could see “a pause that refreshes given how overbought we are right now wouldn’t surprise me. There is some risk of buying the rumor, selling the news.”

Could Bitcoin Become as Valuable as Gold? Could It Reach $250,000?

Yusko is optimistic about the growth of the price of Bitcoin and estimates that in five years it will not only reach $250,000, but that it will reach a market capitalization similar to gold. But at the same time he warns that profit taking will be temporary either way.

Its forecast is based on the performance of the cryptocurrency and the laws of supply and demand of the market. “One of the nice things about Bitcoin as an asset is it has a finite supply,” he said.

"We know every day for the next 140 years how many Bitcoin will be minted through the mining process," 

he added.

“I think Bitcoin has replaced gold and is replacing it. Now it's digital gold,” 

Yusko said.

In the long term, the executive considers that a deflationary process will soon take place in contrast to the steep rise of the inflationary phenomenon that the entire world is experiencing due to the economic effects left by the pandemic.

“The likelihood of us getting a full-on inflationary period, I think, is really, really low,”

he said.

“Normal is that we are in a deflationary death spiral. It’s been going on for a couple decades,” 

he explained.

Yusko bases the deflationary forecast on various pieces of information including the aging of the population and the impact that massive stimuli granted to avoid economic collapse will have on economies.

So How Can We Predict What Will Happen to the Price of Bitcoin?

To find out if BTC is overbought or oversold, you can use Bollinger bands, experts advise. These bands are an excellent indicator of the movements registered by the markets.

Traders often use them to do technical analysis of the markets, which allows them to know if the markets are rising, consolidating, or correcting. 

For example, if the price of BTC is above the upper band, it means that the cryptocurrency is overbought. Instead, when the price falls below the lower band, the crypto asset is considered to be oversold.

Through this indicator, cryptocurrency price peaks and lows are detected. It shows the opportunities to short on exhausted price rallies or to buy on sharp reversals.

In a trending market, overlaps can lead investors to incur losses. Hence, finding a confluence of analytical metrics is a good practice before taking buying or selling risks.

On The Flipside

  • The cryptocurrency has already entered the overbought zone, according to Yusko’s analysis, which could prevent its price from continuing to rise in the coming days.
  • This same appreciation is confirmed by Bitcoin’s relative strength index (RSI), which places the crypto asset in the overbought zone. So it would not be surprising if there is a price correction in the coming days.
  • Fairlead Strategies analyst Katie Stockton recently said that BTC will have a temporary setback and has advised her clients to put off any purchases for now.

Why You Should Care?

  • Bitcoin has managed to get close to the historical maximum price of $64,000 again and many consider that although there will be fluctuations, its rise is unstoppable.
  • It is currently listed as the eighth most valuable asset in the world. BTC already has a market capitalization of $1.16 trillion.
  • The cryptocurrency still needs to appreciate by about 15% to become as important an asset as silver, according to data from companiesmarketcap.com.

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    This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed to be financial legal or tax advice. Trading Forex, cryptocurrencies, and CFDs poses a considerable risk of loss

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