Crypto enthusiasts expected Bitcoin to gain momentum in 2020 thanks to the block reward halving mechanism of the asset. At best, investors expected a repeat of the 2017 rally, but the law of diminishing returns made such a scenario an unlikely reality.
But instead, the current uptrend is now the second most powerful in cryptocurrency history. Here’s what a technical trend strength gauge says about where Bitcoin could go from here.
Perfect storm Economic environment fuels unstoppable cryptocurrency momentum
Bitcoin is known and even feared for its bubble effect. The asset has a reputation for wild volatility, rising thousands of percent in a single rally, but returning 80% of the entire swing.
Anticipating an epic run can result in life-changing wealth, as investors who bought the blood on Black Thursday learned as the New Year dawned and Bitcoin shot more than $ 40,000.
Related reading | TA: Bitcoin Price Determines New ATH Why BTC Bulls Could Aim $ 40K
FOMO from both retail and institutions is driving this rally and keeping demand high. Halving the supply drastically reduced and what little that is left is scooped up by Greyscale offer to its institutional clients at a premium.
There is also a perfect economic storm environment with nearly endless fiat money prints for the cryptocurrency to thrive in.
The combined effect of all these factors has resulted in an upward trend much stronger than anything 2017 had to offer. That year was the year Bitcoin became a household name, rising from $ 1,000 to $ 20,000.
If this current rally is much stronger, what exactly might that suggest for emerging assets?
The Average Directional Index could hint at far more upside for Bitcoin | Source: BTCUSD on TradingView.com
Bitcoin trend strength second most powerful historically: what it means
According to the Average directional index, created by market engineer J. Welles Wilder, Jr., the current upward trend in weekly time frames is now the second most powerful in history.
The tool is used to measures trend strength and read when trends can come to an end. Bitcoin has reached a level that could indicate that the trend is nearing its conclusion, but given all the other factors and where the indicator says the cryptocurrency is compared to the 2013 cycle, there is more upside potential.
The current ADX value is around 65, which according to the 2013 rally pumped an additional 2,000% before any meaningful correction took place. That correction resulted in a 50% drop, but eventually the rally ended at the end of 2013 with an ROI of over 10,000% from the current ADX measurement to the peak.
Is this what investors should expect Bitcoin in 2021?
Featured image from Deposit Photos, Charts from TradingView.com