The price of Bitcoin (BTC) has surpassed $14,700 on Nov. 5 as the sharp uptrend coincides with several familiar metrics and on-chain data points seen in 2017.
From November to December in 2017, the price of Bitcoin (BTC) experienced a steep uptrend to a new all-time high at $20,000.
There are three reasons Bitcoin might face a similar trend in the next months. First, the post-halving cycle is coming into effect. Second, the relative strength index (RSI) suggests a bigger rally. Third, the rally is not overheated, at least in the derivatives market.
Long-term RSI shows Bitcoin not overbought
PlanB, the creator of the Stock to Flow (S2F) indicator, shared a long-term RSI chart of BTC. The indicator, which measures whether an asset is overbought or oversold, shows itis still at a neutral level.
Although BTC price has rallied from $10,500 to $14,600 in only a month, the RSI suggests more upside.
For example, in December 2017, the RSI of Bitcoin surpassed 95 points. When the RSI exceeds 75 points, traders consider the asset to be overbought. Currently, the long-term RSI of Bitcoin shows it is under 70 points.
Post-halving cycle is materializing like the past
In 2017, one of the primary narratives around the upsurge of BTC price was the halving in 2016. A block reward halving, which takes place every four years, causes the rate at which Bitcoin is produced by miners to drop by half.
The slower production of Bitcoin results in an overall drop in BTC inflows into exchanges, leading the supply to fall.
The latest halving happened in May 2020, and in 2017, Bitcoin started to rally months after the activation of the halving. This rally of Bitcoin goes in line with its previous macro rallies.
Not an overheated rally, fewer sellers in the spot market
Throughout the past few days, the funding rate of Bitcoin has stayed negative on major exchanges, especially on Binance Futures. It says that the majority of the futures market has been shorting BTC.
A rally is considered overheated when the futures funding rate starts to rise beyond the average rate, which is 0.01%. In recent weeks, the funding rate of crypto leader has been hovering between -0.01% to 0.01%, showing a rather neutral derivatives market.
In addition to the uncrowded futures market, there are also fewer sellers in the spot market. According to TensorCharts, there are some sell orders at $15,000 level, but no important sellers at that level and above it.
Since there is little resistance between $15,000 and $20,000, this raises the possibility of hitting a new record-high in the next months.
If the same post-halving cycle as 2017 follows, then BTC price would theoretically reach its peak in the second quarter of 2021. If that is the case, there is an opportunity that BTC could far exceed $20,000.
The ongoing rally depicts an immensely strong momentum for Bitcoin as miners have begun selling BTC. This shows the crypto market is absorbing the selling pressure from miners.