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$34,000 support for Bitcoin breaks, is this the end of the rally?

Photo of: Nathan VDH
by Nathan VDH

The 34,000 USD level gave in as Bitcoin dropped to the 32,300 USD level today. Sadly, Elon Musk’s twitter bio change wasn’t enough to curb Bitcoin’s downward momentum.

The BTC is trading at $32,532 at the time of writing. It is currently recording a daily loss of 5.38%, which represents an amount of $1,850.

The BTC will therefore close the month of January 2021 at less than $35,000 – unless there is another “miraculous” Elon Musk pump.

Structurally, the markets are not yet ready for a resumption of the bull rally, as the bulls finally failed to defend the “legacy” of the Elon pump of January 29, 2021.

Even if Bitcoin remains bullish in the long term, it would take another convincing breakout in the short term for the bull race to resume.

In the midst of this downward momentum, MicroStrategy which is heavily invested in Bitcoin has also taken a hit. On December 8, 2020, Citigroup Bank downgrades MicroStrategy shares.

Since then, MicroStrategy shares have gained 113.27%, from $289.47 to $617.31, an increase that occurred in parallel with the Bitcoin rally.

Over the same period, Citigroup’s shares have declined 0.63% from $58.36 to $57.99.

MicroStrategy’s performance could significantly improve in 2021 if the BTC hits $100,000 by the end of the year.

An increase in MicroStrategy’s share price should attract new institutional investors to the BTC markets, eager to replicate this winning strategy.

Michael Saylor’s strategy of acquiring BTC on a massive scale is paying off for the time being though, but whether or not Bitcoin continues to climb is very hard to say (and absolutely necessary for MicroStrategy to continue its impressive run).

Bitcoin needs institutional investors in the short term to buy the dips, with strong selling pressure from whales and miners which have all made hefty profits these last few months. Analysts put a first bottom around $29k but levels such as $24k would not be out of the question, which would draw down the entirety of the market with it.