Mohit Sorout says Bitcoin’s price could reach a new all-time high in three months when it comes out of the current range.
The price of Bitcoin (BTC) has been consolidating within a narrow range for several months. If the major crypto-currency breaks successfully, Bitazu Capital’s founding partner, Mohit Sorout, says a record would be imminent.
Since July 2020, Bitcoin has been trading between $10,200 and $11,800, a range of 15%. It has experienced moderate volatility over a prolonged period, except for some brief spikes in volatility.
When Bitcoin remains stable for a long time in a tight price range, there is usually a large price movement.
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It remains uncertain whether or not there will be a breakthrough in the short term. But if it does, Sorout says it would take BTC three months to reach $20,000.
The daily Bitcoin chart with a trendline
Daily Bitcoin chart with one trend line: TradingView.com, Mohit Sorout
Why wait three months for a maximum in Bitcoin price after a breakup?
Based on previous price cycles, the price of Bitcoin tends to move quickly after staying in a range for a long time. Historically, the pattern has applied for both upward and downward breaks.
From May 1st to July 20th, Bitcoin’s price ranged between $8,800 and $9,800, stabilizing around $9,100. After two months of consolidation, it took 12 days for the BTC price to register a 32% rise to $12.123 at Binance.
Considering Bitcoin’s tendency to see large spikes in volatility after long periods of consolidation, Sorout said:
„Calm before the storm. If BTC had a breakout today, it would most likely reach its previous record high of $20,000 in 3 months“.
When asked about the reasoning behind the three-month gap, Sorout said it was based on an observation of volatility.
According to Sorout, a Bitcoin price increase to $20,000 could occur even earlier than three months. He said this is:
„An observation based on how violent the rises are after periods of moderate volatility. It could be even earlier.
An important variable to note is the decline in open interest in futures compared to previous bull markets.
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Particularly after the charges against BitMEX by the U.S. Commodity and Futures Trading Commission, or CFTC, open interest in futures in general has declined. This could lead to a more stable and gradual upward trend for Bitcoin, unlike previous upward cycles.
Year-to-date open interest of BitMEX
BitMEX’s open interest in the year to date Source: btctools.io
Factors that could strengthen BTC’s momentum in the fourth quarter and throughout 2021
The recent increase in institutional demand continues to promote a strong narrative around an upward cycle in the price of Bitcoin for 2021.
On October 17, Grayscale CEO Barry Silbert said the company had reached a record $6.4 billion in assets under management. Silbert stressed that the firm saw „BIG entries this week“.
Institutions that have been acquiring Bitcoin, such as Square and MicroStrategy, said they see Bitcoin as a potential cash asset. If so, that could mean that many institutional investors are accumulating BTC without the intention of selling in the near future.
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The S2F model with its latest update
Model S2F with its last update. Source: PlanB
The price of Bitcoin has been relatively stagnant throughout October, despite positive news about institutional tickets. But stock-to-flow (S2F) creator PlanB said that asymmetric returns are likely to occur over time. He stated that:
„Why doesn’t #bitcoin price go up with all this institutional buying? Who is selling? BTC’s price is exactly where it should be, standing firm above $10,000, waiting for that moment… asymmetric returns… patience!“