Bitcoin has continued to work higher, and is now grinding around $7700. BTC is up 33% since the last week of June when it touched $5850.
We were bullish on BTC at $5850, and remain so now.
As bitcoin rallied around $1,000 dollars last week, the most important factor we detected was volume. There were a few major step moves higher for BTC, and these were all marked by sudden and powerful upticks of volume. The chart below shows trading volume by hour across the major exchanges.
chart and analysis by Jason Pfaff in TradingView
This volume was very constructive for price, and shows bitcoin is enjoying strong support at this level. Sharp moves are fueled by heavy volume, and any brief dip in the last week was met with another spike of volume, showing bitcoin has a strong bid here. This should be a sustainable level of support, and a perch from which bitcoin can work towards $8,000.
visual by Jason Pfaff data via blockchain.info
We are also seeing a healthy lift in volatility, which is normally another bullish indicator for bitcoin. From Tuesday til Friday, which is when we saw such a strong run into the $7400 area, we saw a 45bps jump in average daily volatility as measured on a rolling 30 day average. The rolling 60 day average shot up 34 bps. These are robust and material increases and positive signs moving forward.
Total users on the network, as defined by unique wallet addresses is up as well.
data via blockchain.info
We believe bitcoin has a high degree of reflexivity as a tradeable instrument, and the volume of users are critical to this outlook. Positive feedback loops and perception based momentum exist and fuel crypto higher. At a basic level, this is why we believe ther are more buyers for bitcoin at 15k than at 5k. This also powers our modeling and why something like the # of users is so critical. We saw a big increase in # of users this week. Far from being a sole cause, we believe this is part of the feedback loop, where some increases fuel price appreciation, which then brings in more users, which fuels more appreciation, etc.
This week, we are forecasting a range of 7100 – 8050 on BTCUSD, with a maximum value of $8050. We maintain a simulation based model that forecasts a variety of scenarios for the coming week to provie a probability for the maximum value bitcoin might achieve and a trading range for the week. The highest probability for a maximum value this week per our model is around $8,000.
mathematical model and visual built by Jason Pfaff
The bulk of the tail risk is to the topside, meaning we could see a break even higher. This is a market moving fluidly higher, and typically, we see large momentum based swings take hold of crypto markets, and push prices higher or lower based on market sentiment.
There is no change to our 2018 outlook this week. We are tracking within $200 dollars of our year end forecast of $10,300.
model and visual built by Jason Pfaff in Trefis