Perhaps the most hotly debated and closely watched asset throughout 2021 has been bitcoin (BTC). The digital currency entered 2021 trading just shy of $30,000 and more than doubled in value to over $60,000 within a few months.
Bitcoin’s surge was a catalyst for the broader cryptocurrency industry. Many well-known cryptocurrencies, like ethereum (ETH) and cardano (ADA), joined the rally. Even meme cryptocurrencies such as dogecoin (DOGE) exploded in value, giving timely investors a potential once-in-a-lifetime return.
But after peaking at more than $64,000 on April 14, 2021, bitcoin prices fell hard and by mid-July was trading near $30,000. While a rally that began in late July helped erase some of those losses, the BTC price has barely held on to the $40,000 level through the end of September.
This begs the question: will bitcoin go up in the final months of 2021? If so, can the momentum be sustained and bitcoin move on to retest those all-time highs, or will any momentum be met with heavy selling pressure?
Bitcoin timeline: April to September 2021
After recording historic all-time highs of above $64,000, many investors had come to believe that a bitcoin price target of $100,000 by the end of 2021 was within reach. Even if prices remain roughly unchanged through December, investors who bought in 2020 are sitting on an impressive profit.
Few investors would have expected bitcoin to tumble in such dramatic fashion. One of the more notable contributors to the negative bitcoin trend came out of China. The Chinese government ordered the crackdown of crypto mining operations in June.
In all, more than 90% of China’s bitcoin mining capacity was taken offline, and it wasn’t immediately clear if this was a short-term event. Some bitcoin investors found the $30,000 level attractive enough to come in and buy the coin, and a sustained turnaround started to show some signs of life.
Perhaps the most notable bitcoin price news was El Salvador’s adoption of the digital currency as legal tender. The South American nation saw its lawmakers vote 62 to 22 to make its cryptocurrency ambitions official.
As legal tender, businesses are mandated to accept bitcoin as payment while the country opens 200 bitcoin ATMs that can convert US dollars to digital currency.
But on Tuesday, 7 September 2021, the day when the country officially adopted bitcoin, the coin lost nearly 10% in value. Perhaps the timing caused many bitcoin watchers to think twice about their stance on the coin. Bitcoin bulls and supporters might have brushed off a one-day selloff, seeing it as nothing unusual for a valitale asset.
Others might argue that the bitcoin price drop was consistent with a broader market sell-off among risk-assets. One needs to only look at the price action in the stock market at the same time for confirmation of weakness across multiple asset classes.
This weakness can be attributed to both global economic recovery concerns and the unknown financial impact of China’s Evergrande fiasco.
Bitcoin analysis for the rest of 2021: key levels to watch
The bitcoin technical analysis points to three resistance and two support levels to watch. A resistance level refers to a price at which an asset historically attracts heavy selling pressure. Support, on the other hand, refers to a price in which an asset attracts buyers who are attracted to the lower price.
These are the three most important resistance levels for investors to keep in mind when formulating their latest bitcoin price prediction.
$59,450 - 8 May high
$52,860 - 7 September high
$48,730 - 18 September high
These are the two most important support levels for investors to keep in mind if they are looking to take advantage of any weakness to enter a position:
$39,500 - 21 September low and 5 August low
$29,200 - 20 July low
At the time of writing (28 September), bitcoin was trading just above $42,000, which is roughly halfway between the 2021 highs and the peak of the selloff that immediately followed. Taking a look at the 20-day moving average offers a hint over a potential BTC value. Typically, if the price of an asset moves above the average, it’s a buy signal.
The opposite holds true that an asset is considered weak if it dips below the 20-day moving average.
In bitcoin’s case, the price moved above the average in July, just above the $30,000 level. This buy signal turned out to be accurate as bitcoin jumped as high as $52,000 in the coming weeks, netting investors a nice short-term return.
But on 7 September 2021, the price fell below the moving average, giving a sell signal. This also turned out to be accurate as the price of bitcoin has yet to recover from near-term losses.
Moving on to a second popular technical analysis tool should give us more insight into the bitcoin price analysis. The relative strength index (RSI) dipped below 30 when bitcoin ever so briefly fell below the $40,000 level in late September.
The last time the RSI was below 30 was in July when bitcoin was flirting with the $30,000 mark. Prior to that, the RSI was also below 30 in May, also when Bitcoin was testing the $30,000 level on a leg down.
From this, we can conclude that the RSI has done a pretty good job at gauging the rhythms of the swings in bitcoin volatility. Near-term traders might consider buying bitcoin at current levels and selling when the RSI starts to push overbought conditions.
Looking back at the chart, traders and short-term investors may want to consider taking profits off the table at $48,000 or $52,000. According to Capital.com’s Chief Market Strategist David Jones, covering the latest bitcoin price action in his recent video:
Bitcoin trading strategy: conduct your due diligence
So long as bitcoin is able to trade above the $37,200 level, the longer-term trend is favourable. Coupled with the absence of any sustained and sharp weakness, one could make the case for a more positive end for 2021. Granted, it may take some time for bitcoin to fully recover and test the $60,000 level.
A dip below around $37,200 should be of concern to investors and could imply a return to the $30,000 level.
Bottom line, the near-term picture for bitcoin looks to be more positive than negative given the digital coin’s ability to maintain the $42,000, while the RSI recently flashed a buying signal. But as is the case with all digital currencies, especially bitcoin, volatility can strike at any moment. The market could see another significant correction.
Please note that any technical and fundamental analysis, and analyst sentiment should not be regarded as investment advice. Any bitcoin price prediction can be wrong. Markets are volatile and the price of an asset can always go against your position.
We encourage investors to perform their own due diligence before making any trading decision. If you want to trade bitcoin with contracts for difference (CFDs), make sure you understand how they work with our comprehensive CFD crypto trading guide.
Keep in mind that contracts for difference are leveraged products, which means profits and losses can be magnified. Make sure you understand how CFDs work. And never invest more than you can afford to lose.
Edited by Alexandra Pankratyeva