5 reasons Bitcoin bulls are still happy

Want to have some fun? Go talk to a group of financial analysts and ask them what they think about the future of Bitcoin.

You are likely to witness some incredibly passionate debate. On the one side you have bears claiming that the end of Bitcoin is near. On the other side are the bulls who cling to 2020 as the year Bitcoin eclipses six figures.

It is hard not to pay attention to the bears when you consider that Bitcoin has lost 30% of its value over the last several months. On the other hand, at the time this post was written Bitcoin's price was still more than double its starting point at the first of the year. It turns out that 2019 has been a year of gain overall.

The question is, do the bulls have anything to hold onto as we turn the calendar to 2020? In a word, yes. There are five things they say bode well for them in the coming months:

1. Balance-holding addresses

Bitcoin investors are similar to securities investors in that they look for metrics that might determine price movement. One of the most reliable metrics for Bitcoin has been the number of addresses with any amount of Bitcoin in them. What makes this metric important is that it is often observed as correlating with adoption. The more addresses with a positive balance, the greater the adoption.

CCN reported early in December 2019 that the number of balance-holding addresses hit an all-time high in early summer. The metric has lost a bit, having peaked at more than 28.3 million addresses. At the height of the 2018 bear market that number was down to 22 million.

This particular metric does not guarantee a bull market in 2020 all by itself. But it is a very strong indicator that people are holding onto their BTC despite not making as much profit in 2019. That takes us to the next point: the holding on for dear life (HODL) investing strategy that has been the hottest thing in Bitcoin.

2. Investors are holding on

Holding on for dear life is a strategy that says you hold onto your BTC, come hell or high water, until it reaches a certain price point. It is a strategy that is gaining steam in anticipation of next year is halving. HODL investors are refusing to sell their assets even as Bitcoin's price flirts with $7,000. They are banking on the possibility that prices could eclipse $20,000 or much more once halving occurs.

So, what is halving? It is an automated action that cuts reward for mining bitcoins in half. Using some made-up numbers, let us say miners now earn one BTC for completing a single block. Beginning sometime in summer 2020, their earnings will be slashed to 0.5 BTC per block. The net effect will be fewer coins mined for more work done.

Though this seems like an odd thing to build into your code, Bitcoin developer Satoshi Nakamoto did so as a way to prevent deflation. Lowering the reward from mining makes each coin more valuable which, in turn, keeps prices on an upward trajectory.

Knowing what we know about the halving concept, few experts deny the fact that Bitcoin's price will rise after it occurs in 2020. The only questions are how far it goes and what the starting point will be when halving occurs. As for HODL investors, they are banking on a starting point in excess of $5,000. If they get it, Bitcoin could easily surpass $20,000 once halving occurs.

3. Price stability

Believe it or not, the bulls are looking at price stability as yet another reason to be happy. They know that it is unusual for Bitcoin to hover around a certain price point for months on end, yet that is exactly what is happening. Bitcoin has been fluttering between $7,000 and $8,500 for the longest time.

This makes bulls happy for the simple reason that it suggests the whales are stockpiling coins. In case you don't know, Bitcoin whales are those investors who own inordinate volumes of coins as compared to everyone else. Their numbers are low for obvious reasons.

The thinking here is that casual traders started bailing out when Bitcoin slipped from $13,000 down to $10,000. More bailed as the price began approaching the $9,000 mark. Since then however, things have gradually stabilised. This suggests that while the queasy were selling, whales were buying.

It seems that this metric would be easy enough to prove just by examining the blockchain record. Though you would not be able to identify who owns what coin, you would be able to see large transfers of coin from exchanges into individual wallets. Unusually large transactions indicate whale activity.

Alt coins take the plunge

It is worth noting here that alt coins have taken the plunge over the last four or five months, too. Bitcoin is not alone in the current tepid market. What is different about Bitcoin is that its day-to-day price fluctuations have not been as volatile as the most prominent alt coins. This lends credence to the idea that whales are accumulating coins.

Couple that with the fact that we do not talk about whales in terms of alt coins and you have a pretty powerful statement. Whales are not accumulating Litecoin, Ethereum, XRP, etc. They do not wait around for XRP and Dash to fall so that they can come in and scoop up cheap coins. But Bitcoin is another story.

4. The bear-bull cycle

The fourth reason the bulls are happy right now is that they are very familiar with the traditional bear-bull cycle. This cycle is easily represented in trading charts and parabolas. To understand what is going on here, you must understand how investors view parabolic curves.

Sit down and chart Bitcoin's price over the last 12 months. Each price point on your chart is represented by a dot. Now draw a line that connects all the dots together. If you favor parabolic curves as a measurement of price movements, you want to see a line with and upward curve. You do not want to see an inverted curve or a straight line.

Disciples of the parabolic curve understand that there is a cycle here. Furthermore, they know that the cycle is fairly predictable in the short term. That is why people who have mastered the parabolic curve are capable of making huge returns in a short amount of time. They follow the curve until it looks like it is just about ready to drop, then they sell.

What does this have to do with Bitcoin? Prior to June 2019, Bitcoin had violated three parabolic curves in its 10-year life. Every violation resulted in a significant bear market. Each of those bear markets was followed by a more aggressive bull. Here's the thing: the fourth parabolic curve was violated in June.

Those who religiously follow parabolic curves know that Bitcoin will reach a certain point of resistance in upward movement before stopping. At that point, the bottom has to drop out as natural market forces weed out casual investors from their more serious counterparts. It is only when all of those casual investors have walked away that prices start rising again.

Once prices start going up, people are encouraged to start buying. The process of building a new parabolic curve starts all over again. This is exactly what the bulls think is going on right now. Many are convinced that Bitcoin has fallen due to violating its fourth parabolic curve this past summer. If so, a bull market is in the works. It may arrive in 2020.

5. Additional diagonal support

Another way to chart Bitcoin transactions is using a diagonal line scenario. Under this scenario, you chart prices over a given amount of time. Then you find all of the high points on your chart and draw a line connecting them. You do the same for all the low points. Obviously, the lines will not necessarily match.

Investors who follow this charting method are looking for fairly straight, parallel, and diagonal lines. Should that be the case - and it is over the last 12 months - it suggests that HODL investors are accumulating more coins to strengthen their positions when the bulls arrive.

For this metric to prove true in 2020, investors cannot afford Bitcoin's price to drop below the low resistance point of $5,300. Anything lower would mean a collapse of the diagonal lines. Then all bets are off.

In summary

As we close the books on 2019, there is plenty of speculation as to what will happen with Bitcoin in 2020. There certainly is no shortage of extreme predictions. If the most enthusiastic bulls are to be believed, Bitcoin could shatter six figures by the end of 2020. If their counterparts on the bear side are correct, Bitcoin might be on its way to a slow and agonising death. The most likely scenario will fit somewhere in between.

One thing we do know is that there are plenty of good things for bulls to hang their hats on. They look at balance-holding addresses, a persistent HODL mindset, price stability, and charting metrics as indications that Bitcoin has nowhere to go but up. Time will tell if their optimistic outlook is justified.